Healey warns Middle East conflict will strain UK budget
Chancellor John Healey says inflation, growth and borrowing costs are under pressure ahead of his first budget on 28 October.
UK Chancellor John Healey has warned that the Middle East conflict will complicate his first budget, saying pressure on inflation, economic growth and government borrowing costs is narrowing the room for policy choices.
In remarks reported by The Guardian, Healey said the government needed a robust “buffer against uncertainty” while maintaining its commitment to fiscal rules. He did not specify the size of the buffer it intends to retain.
Economists cited in the report expect the government may need to raise taxes or impose significant spending cuts to protect about £24 billion in reported fiscal headroom. No measures have been announced, and the government is reportedly expected to maintain commitments not to increase income tax, national insurance, VAT or corporation tax.
Healey also said he was committed to reducing welfare spending and helping more people return to work. The government is facing wider pressure from global bond yields, reported to have reached an 18-year high, increasing the cost of borrowing.
Policy proposals under discussion include Jim O’Neill’s call for tighter welfare spending and a review of the pensions triple lock. Jonathan Cribb of the Institute for Fiscal Studies suggested an Australian-style pension mechanism linked primarily to earnings, with a temporary safeguard during economic downturns. Neither proposal has been presented as government policy.
