Britons looking for a flavor of the upcoming first budget of Andy Burnham’s UK government need look no further than the descriptors emanating from Chancellor of the Exchequer John Healey and his officials at the Treasury: Do no harm. Steady as she goes. Focused.

By Joe Mayes Healey is now in his final week of crafting a package that will seek to sustain the early good vibes and poll bounce of Burnham’s three-month-old administration, while pushing the thorniest and most unpopular questions of British politics to the future.

The chancellor, who succeeded Rachel Reeves when Burnham replaced Keir Starmer in July, will use higher taxes on banks to fund a populist short-term spending package to help voters and businesses squeezed by rising energy costs driven by the US-Iran war. After his predecessor hiked taxes by more than £60 billion ($80 billion) in her two budgets, Healey has no appetite for another big set-piece.

“They’ve calculated that this budget should just be ‘do no harm,’ given everything else that’s going on in the world,” said James Nation, managing director at Forefront Advisers and a former special adviser to Rishi Sunak when he was chancellor and premier. “They don’t want to do anything that derails them.”Healey’s approach means crunch issues such as overhauling the welfare system and long-term investment in defense will be deferred. It also shies away from demands from the Labour left that he should ramp up taxes on wealth and raise spending on public services.

Such caution would waste the opportunity provided by the annual set-piece, according to former Conservative chancellor Jeremy Hunt, who delivered two budgets himself. “It would be a real mistake to have a steady-as-she-goes budget,” Hunt said in an interview. “Budgets are a moment when you really can do quite radical things.”Healey is delivering his budget against a testing market backdrop, caught by a global surge in borrowing costs driven by higher inflation expectations due to the Iran war. One Cabinet minister said Britain’s economic forecasts are effectively being driven by US foreign policy, and the budget would look very different if it wasn’t for events in the Middle East.

At Reeves’ last fiscal statement in the spring, the Office for Budget Responsibility based its economic forecast on a market snapshot with 10-year gilt yields at 4.5%. Yields rose to as high as 5.5% in recent weeks, near multi-decade highs, worsening the outlook for Healey. On Thursday they were just above 5.3%.

The decision to eat into the fiscal headroom has eased the tax-and-spend pressure on Healey, and reflects a calculation in government that poll-sapping or economy-stifling tax hikes will be proven unnecessary if the Strait of Hormuz fully reopens. A plan to make cost-of-living support strictly temporary and targeted will also limit the fiscal pain.

“The chancellor should take the Hippocratic oath at this budget: first, do no further harm to business,” said British Chambers of Commerce President Andy Haldane, who advised Burnham as he prepared to take power. “Firms have faced a relentless rise in tax, cost and regulatory pressures.”On Friday, Healey announced his budget would include measures to reduce the regulatory burden on businesses such as simplifying corporate reporting requirements, while also extending import tariff suspensions on products across sectors including chemicals, plastics and hydrogen.

Still, the deferral of major issues like defense and welfare are tricky for Healey, who quit as Starmer’s defense secretary calling for Britain to spend 3% of GDP on defense by 2030, at a cost of an extra £10 billion annually. Now chancellor, he won’t use this budget to set out a funded plan for that goal, opening him to charges of hypocrisy. Healey is due to address the issue at a spending review allocating funds between departments that’s planned for next autumn.

Healey and Burnham are waiting for the recommendations of government-commissioned reviews by Alan Milburn and Stephen Timms before suggesting how they plan to curb welfare spending, another political hot potato. Spending on health and disability benefits is forecast to rise to £109.8bn in 2030-31 from £76.9bn in 2024-25. The two reviews could have been published sooner, but were pushed back so the chancellor wouldn’t have to include potentially-unpopular welfare that risked angering Labour MPs in his budget, people familiar with the matter said.

Another consequence of Healey deferring major tax hikes or spending changes will be to store up future problems around the quality of Britain’s public services, given that rising inflation expectations will worsen real-terms cuts to many departments’ budgets.

“For plans to reduce borrowing and meet the fiscal rules to be credible, the chancellor must set out overall spending envelopes that he would be genuinely prepared to live within,” Institute for Fiscal Studies Director Helen Miller said in a statement. “Simply penciling in implicit cuts that he has no intention of delivering would make the budget a work of fiction.”

The Treasury appeared to preempt the issue on Wednesday by highlighting £16 billion in efficiencies in departmental spending last year, describing it as “proof that departments can deliver better bang for taxpayers’ buck.”Labour Party insiders say kicking the can down the road on unpopular decisions is part of Burnham and Healey’s strategy to sustain the party’s recent poll bounce and avoid the mistakes of Starmer and Reeves.

The government’s former top duo is perceived to have frittered away the goodwill from Labour’s 2024 election win with an early move to cut winter few payments for pensioners, a barrage of tax rises that upset business, and plans for welfare reform opposed by the party’s backbenchers.

That restraint now helps create a window in the next year in which Burnham could call an early election, given it defers any major tax rises or spending cuts until late 2027, though Burnham currently denies the prospect of a snap vote.

“Even if there’s no conscious plan, I think they’re keeping their options open,” said Nation of Forefront Advisors. For now, “They’re just trying to do the minimum viable.”