LOW KEY BUDGET DEFERS TOUGH DECISIONS UNTIL NEXT YEAR

29.10.2026 Chancellor Healey delivered a low-key budget with some cost-of-living support paid for with a few modest tax increases. The tough decisions have been deferred until next year’s spending round.

This year’s budget was a low-key affair. The cut to VAT on domestic fuel bills was extended while there was a £100 give away to poorer households to help with increases in the cost-of-living. This was funded by a temporary increase in the rate of tax on bank profits and an increase in taxes on savings and property income.

With no major spending cuts or tax increases announced the difficult decisions were deferred until Spring of next year when departmental budgets will be set. In order to stick to the government’s fiscal plan of balancing the current budget by 2029-30 some spending cuts will be required.

Spending on welfare is likely to be a key focus as it has increased steadily in the last decade. The recommendations of the Timms report into disability benefits will be crucial. Given that taxes are at a post war high markets are keen to see some spending cuts that will allow the government to balance the books.

Following the recent sell-off UK bond markets have stabilised over the last few weeks. To make further progress from here they will need evidence that the Labour government is serious about cutting spending. From a political perspective it will not be easy. Starmer and Reeves tried to save money by abolishing the winter fuel payments to pensioners. However, within months, following opposition from Labour back benchers, they were reinstated.

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This post was written by Robin