NEW: Bloomberg Saturday read

Next week John Healey must deliver what Rachel Reeves couldn’t: a budget that keeps both the bond market and Labour MPs happy. By the time he sits down on Wednesday, gilt traders may be happier than backbenchers.

— Healey has found communicating what he wants to achieve at this budget difficult. He says fiscal stability is his main objective, but in Andy Burnham he serves a PM who’s set expectations high with promises of radical change. The cost-of-living is rising. Trump is threatening more Iran chaos. Voters and Labour MPs want evidence of a bold economic plan.

— Instead, the Treasury is talking about a “focused” and “steady as she goes” budget. Energy bill support is due to be limited and temporary. Major calls on defence spending and welfare cuts have been deferred. There won’t be big tax rises, though banks are likely to be hit. Social care and reversing Brexit are way off. It’s led to accusations of a “mañana” approach.

— Aides say the top economic priority since winning power has been dispelling the narrative that Burnham might be a left-wing Liz Truss. That’s ultimately why Healey was made chancellor not Ed Miliband. Advisers note gilts have performed relatively well in the weeks preceding the budget compared to peers like France, arguing that vindicates Healey’s cautious approach.

— But it means Wednesday is a moment of political risk for Burnham: the first real litmus test of whether he has a radical plan that can deliver before the next election. Some Labour MPs are disappointed with the framing of the budget as safety-first. They argue ‘Treasury orthodoxy’ has prevailed again as a capital gains tax hike is ruled out. The Treasury rejects the idea it’ll be a non-event, suggesting there’ll be cost-of-living rabbits.

— It remains remarkable Healey is not insisting on taking the defence spending decision. Defence officials want him to announce the 3% by 2030 target at the budget, saying it’ll be fully funded and he’ll set out how at the spending review. That would at least be a big policy that would win positive headlines.

— Allies of Reeves say it’s hugely ironic that she delivered the most left-wing budget in decades in 2024, raising huge taxes, changing the fiscal rules to borrow and spend more, only to be portrayed by the Labour left as an un-Labour fiscal hawk. Now she’s been turfed out for a chancellor who’ll deliver a far less radical budget and Labour MPs will be asking if they got what they wanted, they argue.

— The difference is Burnham may have the political authority to weather it. The rebels who did for Starmer and Reeves - Miliband, Louise Haigh, Miatta Fahnbulleh - aren’t going to plot against him too. Burnham has shown he can do things the left doesn’t like, from more North Sea drilling to ditching the triple lock and backing Saudi Arabia, with only muted dissent.

— The next few weeks will show if that can last. There have been skirmishes on immigration policy. There remains queasiness about the idea of any cuts to disability benefits. The opposition to cutting PIP remains. The Rendustrialisation Research Group of MPs is worried current plans don’t match the scale of ambitions set out by Burnham when he took office.

— And there is real nervousness among MPs about the 10-year plan and concerns at the lack of formal consultation from No10 about what it should contain. Some in Labour are privately arguing Burnham should not be writing a decade-long policy plan for the party and government’s policy direction unilaterally. Bond investors might be happy, but first at the budget, then again in the weeks before Christmas, Labour MPs’ loyalty will be tested.

With @ChaplainChloe @Joe_Mayes @LucyGJWhite: https://www.bloomberg.com/news/articles/2026-10-24/andy-burnham-tests-labour-loyalty-with-budget-built-for-bond-market