BATTLE has been joined over the shape of Labour’s next Budget as Britain’s economy continues to struggle.

Union leaders are set to meet new Chancellor John Healey as he prepares his first Budget, to be delivered next month, and to press for a radical change of direction.

They are set to argue that Mr Healey’s choices will set the course for the rest of the Labour government’s term.

The meeting comes after the Bank of England left interest rates unchanged at 3.75 per cent.

The bank’s monetary policy committee voted to hold steady by six votes to three, with the minority seeking a rate increase to 4 per cent as inflation moves upwards again and mortgage rates hit their highest level in three years.

Unite general secretary Sharon Graham slammed the bank’s inaction, saying: “The Bank of England has chosen the wrong side. Keeping interest rates high means big profits for bankers but big bills for workers. 

“The bank needs to prioritise the needs of everyday people, not high finance or ivory tower economic theory.”

Ms Graham had already spelt out key demands to the Prime Minister. “We must see things happen immediately. I told him that you have to make working-class people believe their best days are in front of them.

“That tax threshold of around £12,500 — if that hadn’t been frozen for the past few years it would have moved up to over £16,000 now.”

She added that “people at the lower end are paying eye-watering amounts of tax,” referencing thresholds that Mr Burnham had claimed, prior to becoming premier, that he wanted to address.

And Unison, Britain’s biggest trade union, has called for Mr Healey to increase tax on big tech companies to fund investment in the public services.

The union is also urging the Treasury to investigate shifting the balance of taxation from income to wealth.

However, Mr Healey has been working to dampen down expectations of big changes. He and Mr Burnham have committed to the same rules and commitments which boxed in their predecessors.

Allies of the Chancellor have blamed the wars in Ukraine and Iran for the additional difficulties the government faces.

One told the Financial Times that “both of these fronts are having a significant impact on the economy. John knows this better than anyone with his international outlook from defence, and is using it as a basis for some early thinking into the Budget.”

The rise in inflation is largely attributed to the Trump aggression against Iran, which has driven up energy prices worldwide.

Mr Burnham himself has rushed to assure markets that he is not a “tax-and-spend socialist” after former Bank of England top economist Andy Haldane had articulated market suspicions that he was.

“We will take difficult decisions to make sure the economy remains on track,” he said.

Mr Healey’s new Tory shadow, Liz Truss-admiring ex-businessman Andrew Griffith, today pledged tax cuts and the complete repeal of the recent Employment Rights Act if he ever gets to No 11 Downing Street.

In response, a Labour Party spokesperson said: “Andrew Griffith has made the Conservatives’ priorities clear: scrapping hard-won workers’ rights, while promising tax cuts with no explanation of how they would pay for them or which public services would be cut.

“The Tories should be apologising for crashing the economy thanks to Griffith’s old boss Liz Truss — not asking working people to pay the price all over again.”

Mr Griffith also suggested that the Conservatives would cease the practice of appointing a leading trade unionist to the board of the Bank of England, to which TUC general secretary Paul Nowak was named this week.

In a bit of good news for the government, the bank also indicated today it would slow the sale of government bonds accumulated during the pandemic, one of the factors pushing up the cost of state borrowing, since the Treasury has to cover losses on the sale.