How to Tax and Spend in a ‘Turbulent Time?’ U.K. Tries a Balancing Act.

Andy Burnham became the prime minister of Britain three months ago with a promise to restore hope and make what he called “radical” changes to the country’s economy. It will soon become apparent how much of that change he and his government can deliver quickly. On Wednesday, John Healey , the chancellor of the Exchequer, will present in Parliament the first budget of Mr. Burnham’s administration. The new government will have to contend with an increasingly challenging economic environment.

High oil prices, resurgent inflation and a surge in global borrowing costs spurred by the war in Iran are expected to constrain its plans for spending and taxes. Still, Mr. Burnham and Mr. Healey have been offered some respite in modestly good economic news. The British economy has performed better than expected so far this year. And while borrowing costs have jumped sharply, Britain is no longer in the eye of the storm of the bond market.

That distinction has gone to France , which is grappling with its own combination of high debt, political uncertainty and social unrest. “The U.K. economy is resilient, and my budget will protect Britain’s resilience through this turbulent time,” Mr. Healey said this month. He added that “fiscal discipline is the foundation for supporting families and businesses today, and building hope for the future.” Mr. Healey’s immediate task of presenting a budget that supports the economy and doesn’t spook investors has been helped by his predecessor, Rachel Reeves , who introduced plans that would shrink the deficit and funnel more money toward investments.

Mr. Healey has also vowed to stick to rules that Ms. Reeves designed to bring down the government’s debt burden and fully pay for day-to-day spending from tax receipts. Image Britain faces mounting fiscal pressures, with welfare spending exceeding £300 billion a year, high taxes and debt interest payments outstripping defense spending. Credit... Henry Nicholls/Agence France-Presse — Getty Images We are having trouble retrieving the article content.

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