What to expect in tomorrow's Budget: John Healey set to raid banks and crack down on Amazon to help fund cost of living help and fuel duty freeze - but welfare cuts aren't coming

John Healey will tomorrow unveil his first Budget as he battles with an increasingly parlous set of public finances and global economic turmoil due to the Iran war.After 101 days as Chancellor, Mr Healey will set out his fiscal plans to the House of Commons amid growing warning signs about the UK economy.The Chancellor is said to be planning a 'steady-as-she-goes' Budget with some key measures to provide 'breathing space' to hard-pressed Brits.These are expected to include energy bills support for poorer households, a freeze to fuel duty, action to help first-time buyers, and tax relief for smaller businesses.Mr Healey is set to bring in cash to fund these moves by launching a fresh raid on banks and a new crackdown on online retailers such as Amazon, eBay and Temu.But - in contrast to his predecessor Rachel Reeves - he is not thought to be planning any huge tax and spend changes.Meanwhile, measures to tackle the country's ballooning welfare bill from Mr Healey and Prime Minister Andy Burnham are not set to be announced until next year.Here's what to expect when the Chancellor addresses MPs at 12.30pm on Wednesday: John Healey will tomorrow unveil his first Budget as he battles with an increasingly parlous set of public finances and global economic turmoil due to the Iran war The Chancellor is said to be planning a 'steady-as-she-goes' Budget with some key measures to provide 'breathing space' to hard-pressed BritsHealey's reduced headroom The Chancellor is thought to have limited scope for Budget giveaways due to the stretched public finances.The increased cost of Government borrowing, as a result of the Iran war, is believed to have significantly reduced his fiscal headroom.In March, the Government's buffer against its fiscal rules was forecast by the Office for Budget Responsibility (OBR) to be around £24billion.But the Resolution Foundation estimates that could have now halved to £12billion.Stealth tax raid continuesMr Healey is not expected to make any major changes to income tax thresholds, which means the Government's 'stealth raid' is set to continue.The personal allowance, the point at which most workers begin to pay tax, has been frozen at £12,570 since 2022.In last November's Budget, Ms Reeves announced the freeze on the personal allowance, as well as income tax thresholds, was due to continue until 2031. Amid rising inflation, freezing income tax thresholds and the personal allowance has created so-called 'fiscal drag'.This is where people getting pay rises to deal with inflation are pushed into higher tax brackets, eroding their real-terms pay.Research by the House of Commons Library revealed that more than half a million more people across the UK will be dragged into paying the 40p higher rate of income tax in 2026-27 as a result of keeping tax thresholds frozen this year.If the Office for Budget Responsibility (OBR) - which will release its latest economic and fiscal outlook alongside Wednesday's Budget - makes projections for even higher inflation and earnings growth over the coming years, then it will signal that even more Brits are set to fall victim to 'fiscal drag'.Pensioners protected from income taxMr Healey is poised to introduce a new tax allowance for low-income pensioners due to be dragged into the tax system for the first time.The state pension 'triple lock', introduced by the Coalition more than a decade ago, means the state pension increases every year by the highest of inflation, average earnings growth or 2.5 per cent.This April it will track wage growth of 3.9 per cent, taking the full new state pension from £241.30 per week to £250.70.As a result those only receiving the state payments are set to have an annual income above the personal allowance threshold of £12,570 - which has been frozen since 2022.The Chancellor will unveil a tailored tax allowance as a solution to prevent that from happening, but experts have warned it will be 'messy' with 'cliff edges' and escalating costs.Steve Webb, partner at pension consultants LCP said: 'This scheme is being developed because the repeated freezing of the personal allowance has dragged more and more pensioners into the tax net.'But the proposed solution looks messy and increasingly expensive. The gap between the new state pension and the tax threshold is set to grow every year, which will make the policy hard to switch off.'But if it continues, the cost will grow and grow. And if the extra allowance is available only to those on a low income, there could be a growing 'cliff edge' problem where those with very small amounts of private income lose the whole allowance and end up worse off than those with nothing.'Although the level of the full new state pension is often stated as simply the weekly value multiplied by 52, the Government calculates it by applying the uprating to the weekly payment, converting to a day rate and then multiplying by 365.25 to account for leap years.That gives a figure of £13,081.17.Confusingly HMRC calculates the pension's annual value for tax purposes based on 51 weeks at the new level, and one week at the old level. On that basis the annual sum is £13,027.Slower minimum wage hike for younger workers Mr Healey is poised to water down Labour's vow to equalise the minimum wage for under-21s.The Chancellor is expected to announce a 3.9 per cent rise in the national living wage, which would take it from £12.71 to £13.20 per hour.However, Mr Healey will reportedly not announce a bigger hike to the minimum wage for workers aged 18 to 20.The move is being seen as backtracking on Labour's manifesto, which promised to end 'discrimination' in minimum wage rates, although it did not give a fixed timetable.Businesses have warned previous large wage increases for under-21s, coupled with the pressure of increasing national insurance contributions, are making it harder to employ young people.The apparent shift opens another fault line in Labour, with Housing Secretary Angela Rayner having previously talked up the need to keep the pledge.Fuel duty freeze extendedThe Chancellor is expected to freeze fuel duty and keep the 5p discount amid soaring pump prices caused by the Iran war.Fuel duty was due to be unfrozen for the first time in 16 years, but Mr Healey is thought to have bowed to pressure to now keep it at 53p per litre.The 5p cut first introduced in 2022 amid the Ukraine crisis, which was only supposed to last a year, is also expected to be extended again.Petrol and diesel prices have continued to soar this year, as a result of the Middle East conflict and ongoing disruption from Russia's invasion of Ukraine. Diesel pushed past the record price of £2 a litre earlier this month, while average unleaded petrol prices stand at £1.75 a litre, their highest in more than four years.'Breathing space' for householdsSince becoming PM, Mr Burnham has promised to provide 'breathing space' for families and businesses battling the cost of living crisis.Household energy bills are forecast to surge to an average of more than £2,000 a year from January as global fuel prices continue to rise.Ofgem's energy price cap rose to £1,723 for a typical household on October 1, but forecasters are predicting an even steeper rise at the beginning of next year.The Chancellor is said to be planning a boost to the warm homes discount to provide some relief to the poorest households. But this is only available to those in receipt of benefits.The New Economics Foundation think tank has warned one million low-income households will be left without any support.They have urged the Government to bring in a 'national energy guarantee', which would cap a block of essential energy for every household at late 2024 prices.Ahead of the Budget, Mr Healey and Mr Burnham have unveiled a series of 'everyday fixes' to help people through the cost of living crisis.These include ending a cliff edge in benefits faced by unpaid carers, making a higher tax-free mileage allowance of 55p permanent, and slashing tariffs on a range of popular foods - including chocolate, beans and gherkins.They are also extending parental pay to more than 150,000 parents each year, including self-employed fathers who had previously missed out.Tory leader Kemi Badenoch has attacked the PM and Chancellor for concentrating on 'tiny bits of micro-policy' while kicking tougher economic decisions 'into the long grass'.A raid on banksMr Healey is expected to increase the surcharge on bank profits from 3 per cent to 8 per cent in his Budget.This would reverse a tax cut introduced in 2023 by former Tory chancellor Jeremy Hunt.Trade unions have piled pressure on Mr Healey to target the banks in order to raise revenues.The TUC has claimed reversing the Tory tax cut and setting the surcharge at 8 per cent will raise £9billion over four years.But City representatives have claimed the move will stifle investment in Britain.Filling Starmer's defence spending black holeAhead of his Budget, Mr Healey had the task of filling a £4.7billion hole in defence spending plans that was created by his predecessor Ms Reeves and former PM Keir Starmer.The Defence Investment Plan, one of Sir Keir's final major announcements as PM, promised an extra £15billion of funding for the UK defence sector but only committed £10.3 billion to it, leaving the rest for Mr Healey to find.The extra cash means Government spending on defence will rise to a 2.7 per cent share of the economy by 2027.But Mr Healey is not expected to provide full details of how the Government will reach spending 3 per cent of GDP on defence by 2030, or 3.5 per cent by 2035 - a NATO target.This is now not expected to come until the Government's spending review next year, despite Mr Healey having quit as defence secretary in Sir Keir's administration over the issue earlier this year.However, the Chancellor is said to be poised to put more money into the state-owned National Wealth Fund and British Business Bank, with some of the cash then invested in UK defence firms.The move - which will raise the percentage of the UK's GDP spent on defence - is intended to signal a 'downpayment' on Mr Healey's aim of reaching 3 per cent by 2030.Tax crackdown on Amazon and Temu Mr Healey will reportedly announce online marketplaces - such as Amazon, eBay and Temu - will be made responsible for collecting tax owed by all retailers selling on their platforms.Online marketplaces are required to collect VAT on sales made by overseas businesses to UK customers, but some foreign firms have been said to use shell companies to bypass the rule.Under the proposed changes, online platforms would be required to collect VAT for all retailers on their platforms with an annual turnover above £90,000, regardless of where they are based, it has been widely reported.The move is expected to raise up to £1billion and help fund cuts to business rates for high street shops.A Help to Buy revivalMr Healey is expected to confirm full details of a new Help to Buy-style scheme.First-time buyers could get the keys to their home with just a 2.5 per cent deposit saved as a result of the Your First Home scheme.A loan worth 20 per cent of their property’s value will be available to help pay for the purchase as part of the scheme.This equity loan will initially be interest-free to ensure it remains affordable.... and what's not in the BudgetThe Chancellor is expected to avoid increasing capital gains tax or lowering the threshold for the 'mansion tax', despite calls from some Labour MPs for more 'wealth taxes'.He is also not set to give any details of the Government's plan to bring down Britain's ballooning benefits bill.Since becoming PM, Mr Burnham has insisted he will 'bring the welfare budget down', but ruled out 'crude' cuts to benefits in doing so.He is said to have delayed a major report on youth inactivity until next month in order to prevent it overshadowing the Budget.The Government is now expected to publish two reports next month - one by Alan Milburn on youth unemployment and one by Stephen Timms on disability benefits - before coming forward with proposed welfare reforms next year.