Healey’s first Budget: no shifts, no surprises

In the past few months Andy Burnham’s government has profiled itself as one targeting active intervention to improve British people’s lives, with a mixed agenda of State support and intervention into key economic issues and more devolution of powers to local authorities.

The UK 2026 Autumn Budget does not reflect these wider ambitions, which may be part of Burnham’s longer-term political agenda.

UK Budget 2026: the economic backdrop

The 2022 Labour Manifesto promised not to raise income tax, national insurance or VAT, effectively becoming a self-imposed constraint on the budget. Since then, international pressures, including turmoil in the Middle East and the continuing Russia-Ukraine conflict, have contributed to higher energy prices, inflation and interest payments on government borrowing, alongside a need to increase UK defence spending.

The idea that extra spending and investment can be supported mostly by economic growth seems a bit of wishful thinking. Although UK real GDP growth has been resilient, at 1.3%, the Office for Budget Responsibility (OBR) has revised its 2027 real GDP growth forecast from 1.6% to 1.0%, while raising its inflation forecast from 2.0% to 3.4%. This points towards worse living standards for British people.

Cost of living and support for businesses

One priority has clearly been to contain short-term damage and provide targeted measures to support consumer and business confidence while pushing back against the spiralling cost of living and doing business.

Smaller, short-term measures, including removing standing charges on household gas bills, extending the fuel duty cut and zero-rating VAT on domestic energy, a £100 energy payment to households in England in council tax bands A to D, and lower tax rates for some High Street businesses, could support both current costs and confidence.

Local leaders will also receive more ‘power of the purse’ through the retention of local business rates, while mayors have been promised the ability to retain a portion of income tax from next year.

But this support can survive sustainably only if coupled with longer-term solutions for growth, which are still looking dim.

Banking, housing and migration

The banking and gambling sectors have been targeted for tax rises. The temporary increase in the bank corporation tax surcharge from 3% to 6% has, however, been accompanied by the scrapping of plans to cut the annual cash ISA allowance from £20,000 to £12,000.

On housing, about £2 billion has been made available to deliver around 10,000 homes in England, prioritising those for social rent, and to help those sleeping rough to find a route off the streets. However, this has been accompanied by new measures to help first-time buyers (especially young people) save for a deposit and access equity loans to purchase new-build homes.

On migration, falling net migration is critical for the budget because immigrants are, on average, net contributors to the exchequer. The Budget aims to tighten immigration for lower-skilled workers while easing rules to attract global talent and high-skilled professionals.

Female entrepreneurs and Higher Education

The Chancellor has pledged greater wage transparency to tackle the gender pay gap, around £15 million to combat misogyny, and paid parental or paternity leave for self-employed fathers and partners. The Budget also includes support for female founders by doubling the British Business Bank’s capital commitment to female-led businesses and launching a specialised scale-up programme.

However, despite acknowledging the importance of innovation and Higher Education to future prosperity, the budget extends no support to UK universities facing a serious financial crisis. Universities are left alone to fare their own issues.

Financial markets remain calm

The budget speaks to many current worries affecting society, but its longer-term growth strategy remains unclear.

Financial markets nevertheless remained steady following John Healey’s speech. The drop in fiscal headroom from £23.6 billion to £15 billion was already priced in and, by sticking to the fiscal rules and avoiding further borrowing, the Chancellor appears to have reassured investors.

To speak with Dr Miriam Marra, or any of our academic experts, contact pr@henley.ac.uk.