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7h ago

Healey Delivers Cautious ‘Breathing Space’ Budget as OBR Cuts Growth Forecasts

The independent OBR’s weaker forecasts shrink the government’s fiscal headroom to about £15bn, leaving major funding choices — including how to meet defence and welfare promises — to next year’s spending review.

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LONDON, ENGLAND - OCTOBER 28: Chancellor John Healey leaves 11 Downing Street to present the Autumn Budget to Parliament on October 28, 2026 in London, England. This is Chancellor John Healey's first Budget under Prime Minister Andy Burnham following his entry into office in July. He faces a challenging economic landscape shaped by high government borrowing costs and global market pressures tied to the conflict in the Middle East. (Photo by Dan Kitwood/Getty Images)
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Overview

  • Chancellor John Healey set out a deliberately cautious Budget of small, targeted measures and modest giveaways to give households and businesses short-term relief.
  • The Office for Budget Responsibility downgraded near-term growth to 1% next year and 1.6% in 2028, and projected a deficit of about 3.4% of GDP while trimming the government’s fiscal buffer to roughly £15bn.
  • Healey pledged to raise defence spending to 3% of GDP by 2030 and 3.5% by 2035 but did not specify funding plans, saying details will be decided in the next spending review.
  • The Budget’s measures include a one-off £100 payment for around 20 million lower-council-tax-band households, the removal of standing charges on energy bills, an extended bus-fare cap, and targeted tariff cuts paid for by narrow tax changes such as a higher bank surcharge.
  • Critics seized on the deferral of major choices and Healey’s on-stage verbal slips, commentators warned the government may need up to about £35bn a year to sustain NHS and defence commitments, and markets will watch next year’s spending review for how those gaps are closed.