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4h ago

Healey’s First Budget Protects Short‑Term Support While Shrinking Fiscal Headroom

The package secures a reduced £15bn fiscal buffer, postponing major funding decisions on defence and welfare to next year’s spending review.

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British Chancellor of the Exchequer John Healey presents the Financial Statement and Budget Report at the House of Commons in London, Britain, October 28, 2026. ©House of Commons/Handout via REUTERS
Britain's Chancellor of the Exchequer, John Healey, holds up the traditional red ministerial box outside No 11 Downing Street before departing to the House of Commons to deliver the first budget under Prime Minister Andy Burnham's government, in London, Britain, October 28, 2026. REUTERS/Hannah McKay
Chancellor of the Exchequer John Healey delivering his first Budget in the House of Commons. (Photo: House of Commons/Press Association)

Overview

  • Chancellor John Healey delivered his first Budget on Oct. 28, 2026, combining one‑off cost‑of‑living help such as a £100 energy payment for about 20 million households with extensions to VAT and fuel relief and a 3.9% rise in minimum pay.
  • The Office for Budget Responsibility downgraded near‑term growth to 1% for 2027 from 1.6% and raised inflation for 2027 to 3.4%, while projecting debt interest will reach about £160bn a year by 2031‑32.
  • Revenue measures are mostly narrow and temporary, including a temporary doubling of the bank surcharge to 6%, a new 4% tax on landlords’ rental profits, and higher taxes on savings and property income alongside frozen income tax thresholds to 2031.
  • Think‑tanks including the IFS and the Resolution Foundation say the Budget’s short‑term support and fiddly tax changes do not address long‑term growth, warn real household incomes will stagnate, and flag likely departmental cuts at the next spending review.
  • The government kept to tight fiscal rules but cut its margin to roughly £15bn, and it signalled more “hard decisions” ahead as funding for defence and welfare is deferred to the spending review, creating political and spending risk next year.