Chancellor John Healey delivered his first Budget today, accepting higher borrowing and a thinner fiscal cushion while keeping the fiscal rules and the no-income-tax-rise pledge. Delivered around 12:30pm for Andy Burnham’s government, it was a low-drama package.
It was paid for partly by tax rises on banks, landlords, savers and gambling, plus more borrowing. The Debt Management Office (the government’s debt issuer) has a 2026-27 net financing requirement of £258.6bn, up £7.4bn from £251.2bn.
The Office for Budget Responsibility, the official forecaster, put headroom against the fiscal rules at £15bn, down from £23.6bn in March. It forecast growth next year of 1%, down from 1.6%.
At about 1.48pm, the 10-year gilt yield was 5.323%, down 2 basis points, and the 30-year was 5.711%, down 3 basis points. The FTSE 100 was up 0.1%, the FTSE 250 up 0.4% and sterling little changed around $1.33.
Kathleen Brooks, research director at XTB, said the bond market’s verdict was plain.
It was meant to be a steady as you go budget. The bond market is calling it a very boring budget – yields a couple of basis points lower at the long end and virtually unchanged elsewhere.
Kathleen Brooks, XTB
Banks were the winners. Lloyds Banking Group (LON: LLOY), Barclays (LON: BARC) and NatWest were up 3.3% to 3.6% in early afternoon trading. The bank profit surcharge rises from 3% to 6%, temporarily, and is expected to raise £305m this year and nearly £1bn next.
| Measure | Change | Who it affects |
|---|---|---|
| Bank profit surcharge | Up from 3% to 6%, temporary | UK banks, shareholders |
| Income tax on savings and property income | Up 2p in the pound from April | Landlords, savers |
| Cash ISA limit | Planned cut to £12,000 scrapped | Savers |
| Starter ISA / First Time Buyer ISA | New; the latter from April 2029 | First-time investors and buyers |
| Council tax payment | £100 one-off | Many households |
| Fuel duty / electricity VAT | Rise delayed; VAT cut extended to next July | Drivers, households |
The Cash ISA allowance stays at £20,000, and the First Time Buyer ISA replaces the Lifetime ISA, according to Fidelity. Pensions were largely left alone.
Helen Miller, director of the Institute for Fiscal Studies, said the Budget had little that would move the dial on growth. For traders, the Bank of England, which is expected to start raising rates in November, looks the bigger test, followed by next year’s Spending Review.