Chancellor John Healey delivered his first Budget, ruling out broad-based tax rises while using part of his fiscal buffer to absorb the cost of the Iran war. The Office for Budget Responsibility puts headroom against his fiscal rules at £15 billion in 2029-30.
Chancellor John Healey ruled out broad-based tax rises on Wednesday as he delivered his first Budget. He drew on part of his fiscal buffer to cover the Iran war, which leaves £15 billion of headroom against his fiscal rules.
According to Investing.com, Healey told parliament: "I will not raise tax on working people." He said he had also rejected cuts that would slash public services.
Iran war pushes up borrowing costs
Healey said the war had driven up costs for British families through higher energy costs and higher interest rates. The UK will spend £14 billion more on debt interest this year, he said, as global yields have risen.
The OBR said the Middle East conflict was a key driver of its forecasts. Higher oil prices have fed into petrol costs and are expected to keep upward pressure on inflation.
Borrowing is now forecast at 4.2% of GDP this year, up from the 3.6% projected in March. It is then expected to fall to 3.4% next year.
Headroom shrinks but fiscal rules hold
The headroom is down from £23.6 billion in March but in line with market expectations of about £15.2 billion. Healey said he met both rules: day-to-day spending must be covered by tax receipts, and debt must be falling as a share of GDP by the third year of the forecast.
According to the OBR, GDP will grow by 1.2% this year and 1% next year. In March it had predicted growth of 1.1% in 2026.
Energy and cost of living measures
Healey said the government will extend a VAT cut on energy through the winter and spring to July, taking £50 off the annual price cap. He also confirmed the government is abolishing standing charges on gas bills for 23m homes.
In addition, 20m households in council tax bands A to D will receive a £100 energy payment paid directly into bank accounts, at a cost of £2.6bn. Fuel duty will be frozen for the 16th year in a row.
Sources: The Guardian, Investing.com
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