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The upcoming autumn Budget is expected to be tough, Chancellor John Healey warned, as the US-Iran war continues to cripple the economy. He issued the warning after a rise in government borrowing, reflecting concerns about inflation caused by Donald Trump’s war with Iran. Mr Healey told the Financial Times that the UK would emerge from the Budget on October 28 with a buffer against economic uncertainty.
He said, "What’s happening in the Middle East is hitting inflation, growth, and borrowing costs." Economists predict that the fiscal buffer Rachel Reeves built through tax rises and spending cuts will be squeezed by global turmoil, potentially limiting Andy Burnham’s efforts to address the cost-of-living crisis. Mr Healey did not specify how much fiscal headroom he plans to maintain. A key fiscal rule requires the Treasury to achieve a surplus by the end of Parliament, excluding investment.
He assured that both he and the Prime Minister would meet these rules with a buffer against uncertainty. Trump’s war with Iran is putting strain on the UK economy. Mr Healey faced criticism from Conservatives for not recommitting to spending 3% of GDP on defence by 2030, though he stated the UK would meet the 3.5% target by 2035 as part of NATO commitments, which will be detailed in next year’s spending review.
Additionally, he announced changes to Treasury rules to lower the discount rate from 3.5% to 3%, aiding regional regeneration projects like new schools and roads.
Source: The Independent
