Next week, UK Chancellor of the Exchequer John Healey must deliver what his predecessor, Rachel Reeves, couldn’t: A budget that keeps both the bond market and the governing Labour Party happy. By Alex Wickham, Chloe Chaplain and Joe Mayes By the time Healey sits down in the House of Commons on Wednesday afternoon, gilt traders may be more pleased than 404 lawmakers who crowd Labour’s benches. The Treasury has signaled a “steady as she goes” budget, buoyed by praise from the International Monetary Fund and investors who have flocked back to the country’s debt amid a global bond selloff.

The focus on fiscal prudence contrasts with Prime Minister Andy Burnham’s words when he launched his campaign for the Labour Party’s top job last year with a lament against Britain being “in hock to the bond market.”The risk is that the members of Parliament who rebelled against former Prime Minister Keir Starmer and installed Burnham in July grow impatient waiting for the radical change he promised.

Burnham last month laid out ambitious plans for everything from revising the UK’s Brexit deal to setting up a new national social care service. But Healey’s budget will do little to advance those projects, and major decisions on defense spending and welfare cuts have also been deferred.

Healey has also promised to hold the line on borrowing and signaled there won’t be broad tax rises. Instead, the chancellor is expected to increase bank taxes to pay for “targeted and temporary” relief from surging energy prices for the neediest households. He’s likely to maintain a fiscal buffer of at least £15 billion ($20 billion), according to a Bloomberg survey or primary dealers.

Against that mood music, British bonds have outperformed markets like France, which has been gripped by protests and growing fiscal doubts. That’s been by design, say aides, who cited the decision to choose Healey, a former defense secretary known for his measured approach to politics, over a more left-wing alternative like Ed Miliband, to be chancellor.

An early goal for the administration was to counter any narrative that the unabashed socialist prime minister was a Labour version of the Conservative prime minister Liz Truss, whose policies roiled the markets, according to one aide. The budget will show they want no repeat of Truss’s 2022 “mini-budget,” which helped drive up the premium on British bonds and eventually push the Tories from power, said the aide, who asked not to be named discussing internal deliberations.

Like Starmer, Burnham continues to use Truss’s example to deflect criticism of his fiscal plans by the current Conservative leader, Kemi Badenoch. The Tory leader’s shadow chancellor, Andrew Griffith, was a Treasury minister during Truss’s disastrous tenure.

“Does anybody on this side or anybody around the country believe that this party, of all parties, has the audacity to come to this house and lecture us about how to do a budget?”Burnham asked in Parliament this week. “People in this country, British households, are still paying the price of that disastrous budget.”Government officials believe they need to give themselves room to maneuver if the economic picture worsens in the months ahead. There are increasing concerns among cabinet ministers and senior officials that US President Donald Trump could escalate his war against Iran after the American midterm elections on Nov. 3.

That would further disrupt energy flows and darken the global economic outlook, rendering Healey’s budget out of date within weeks. It’s hard to produce a comprehensive support package when the Treasury simply doesn’t know how the coming weeks in the Middle East are going to play out, an aide said.

The fiscal caution brings political risk for Burnham, whose successful toppling of Starmer demonstrates the peril of letting down the Labour left. Several governing party MPs told Bloomberg they were disappointed by the framing of the budget as safety-first, saying they had hoped to be able to give their constituents more to demonstrate to Burnham’s commitment to change.

Treasury officials rejected that characterization, insisting the budget will include some surprise cost-of-living measures that will please voters and backbenchers, and rejecting the idea that it will be something of a non-event.

Defense officials suggested Healey could win some positive headlines by committing to spending 3% of economic output on defense, and explaining that he’ll set out how he’ll get there in next year’s spending review.

Still, Labour MPs speak privately about their concerns that the often-cited “Treasury orthodoxy” has prevailed over any political ambition Burnham may have had, with Healey’s decision this week to rule out any rise to capital gains taxes seen as an example.

Members of the Reindustrialization Research Group of MPs pushing for an ambitious approach to developing and protecting industry are equally nervous that actions of the Treasury and other departments do not match the scale of ambition set out by Burnham when he entered office.

Indeed, the first Healey budget might end up looking less radical than the one undertaken by Reeves after Labour’s election win in 2024. That year, she raised tens of billions of pounds in taxes, hiked spending, changed the fiscal rules to increase borrowing and left herself with wafer-thin fiscal headroom.

That may leave Labour MPs asking if this was the sort of budget they wanted after ousting Starmer and Reeves. The difference may be that, unlike his predecessor, Burnham has the political authority to weather any gripes.

The new prime minister has enjoyed a polling bounce since taking office that has seen Labour overtake Reform UK. In recent weeks he has also shown he can take decisions that the Labour left may instinctively oppose — from promising to change the triple lock on pensions to approving more gas drilling in the North Sea and deploying the Royal Air Force to defend Saudi Arabia — with only muted opposition.

The rebels who led the charge against Starmer and Reeves for not being bold enough, including Miliband, Miatta Fahnbulleh and Louise Haigh, are now in Burnham’s cabinet and not about to mount a move against his leadership.

Labour MPs’ loyalty will be tested in the weeks following the budget. There have been skirmishes this week over immigration policy. And while the party is coming round to the idea that a degree of welfare reform is needed in order to tackle youth unemployment, queasiness remains around the suggestion of disability welfare cut. Some privately point out that opposition to the planned cuts to personal independence payments proposed under Starmer’s leadership is still very much present in the party.

Burnham came into office with a promise to learn from the frustrations that built under his predecessor and better engage with his MPs. But there is nervousness among MPs about a 10-year plan due to be unveiled by Burnham in December, and concerns the prime minister hasn’t formally consulted with them about its contents. Some in Labour privately argue that Burnham should not be unilaterally writing a decade-long plan for the party and government.

So far, Burnham has shown he has the political skill to keep a restive Labour Party together. Wednesday is the first real litmus test of whether that will last.