Cost of living measures in the budget

The john healey budget puts household costs at its centre. Healey is expected to offer temporary support for poorer families before typical energy bills rise steeply in January, while pledging longer-term energy market reforms intended to bring down bills for all households.

Alongside the energy measures, the chancellor is expected to deliver a series of "everyday fixes" for household budgets:

• •Cancelling January's planned increase in fuel duty.
• •Ending the carers' allowance cliff edge, which penalised unpaid carers who exceeded their earnings limit by even a few pence a week.
• •Raising the minimum wage by nearly 4%, though the rise for under-21s will be slowed after warnings they are priced out of jobs - a move that has prompted accusations Labour broke a manifesto pledge.
• •Shielding nearly one million people from paying income tax, with protection for pensioners and retirement savers, and making the revived Help to Buy scheme more generous for middle-earners.

Why Healey calls it a 'difficult moment'

In a pre-budget video, the chancellor said conflicts abroad are pushing up energy prices and the cost of living at home, piling pressure on families, businesses and the public finances. He told ministers at a cabinet meeting last week that inflation caused by the conflict, which hit an in-year high of 3.5% last month, is the political backdrop to the budget.

He pledged to ease the cost of living responsibly while sticking to Labour's self-imposed fiscal rules, aiming to reassure markets that reform will make Britain more resilient to global shocks. His room for giveaways is limited by stretched public finances, made worse by international market turmoil caused by the Iran conflict.

Healey said in his pre-budget address.

Paying for it: banks, online retailers and bond markets

To offset damage from the Middle East war, Healey is poised to raise taxes on Britain's banks, potentially reversing Jeremy Hunt's cuts to the bank surcharge, in a move expected to raise upwards of £2bn a year. Online retailers will also be made responsible for collecting tax owed by firms selling on their platforms.

The borrowing backdrop is unforgiving. On Tuesday the government paid the highest yield on new five-year bonds since 2008, above 5%. Markets expect the Bank of England to hike rates four times, to 4.75%, over the next 12 months, though cutting energy prices would lower inflation and ease that pressure. Healey is expected to offset part of the hit to the public finances from higher interest rates on government borrowing, driven by rising inflation and global bond market turmoil.

Opposition and next steps

The Tories said the chancellor was set to 'shy away' from difficult decisions, including bringing down the welfare bill. The prime minister responded that he does not want to do this through 'crude cuts'.

Shadow chief secretary to the Treasury Richard Fuller said Britain's public finances are on a cliff edge and a 'do-nothing' budget will not solve spiralling welfare costs, a crippling tax burden, mounting debt and rising global threats. The Lib Dems warned against a 'steady as she goes' budget, with deputy leader Daisy Cooper saying families are squeezed from all sides and businesses face mounting costs.

The budget is expected to be relatively modest, with important decisions on tax and spending deferred until next year. On the defence spending budget, Healey is expected to confirm more investment in defence industries - described as a 'downpayment' on the 3% of national income target - but to wait until next year's spending review to confirm the timetable. Detail of Andy Burnham's devolution agenda on skills and employment support is not expected until the government publishes a white paper in the weeks ahead.