Autumn Budget 2026: Healey speech gives little away as fiscal discipline gets Labour-ed

Chancellor John Healey delivered his first major speech since entering Number 11 and there was little being given away ahead of his set piece Budget at the end of October.

There was much of what your might expect – sounding pro-business and fiscally responsible without any details about how to pay for it all. He said the government should be “honest” about the need to control public spending but he didn’t indicate where cuts could come. Labour MPs have hardly shown a willingness to play ball and vote through any spending cuts. 

As has been the wont of every Chancellor since the Truss/Kwarteng episode, the importance of fiscal discipline was laboured. Healey said it was “indivisible” from growth. There was an emphasis on public finance institutions investing in the private sector more. It’s timely that a move to cut the discount rate from 3.5% to 3.0% will justify a larger pipeline of public investment projects without changing the underlying cash cost.

Healey avoided ruling out tax hikes – no Chancellor would dare to rule them out, except of course reaffirming the party’s 2024 manifesto commitment not to raise VAT, NI or income tax (of course Reeves already has broken that pledge by hiking employer NI contributions). And he could not be drawn on sacred cows like ending the pensions triple lock. There was the Burnham influence on show – plans to set out a plan for greater fiscal devolution to let regions hold on to business rates and income tax generated there.

Financial markets are shrugging this one off. The Budget is the real event. We have yet to see any policy test balloons sent up but it’s early days still. Expect the rumour machine to move up a gear or two in the coming weeks, though it seems he is keen to avoid the level of speculation that preceded the two Reeves Budgets in 2024 and 2025. On that front one can sense a shift in the approach, though he won’t be able to avoid speculation about how much fiscal headroom has been lost due to the rise in bond yields, and therefore what levers he can pull. The £24bn headroom left by Reeves after her March statement may have halved. Given more borrowing is off limits due to bond vigilantes on the prowl and the UK's inflation premium for gilts because of our sensitivity to gas prices, it looks like tax hikes are an inevitability – particularly as Healey has tied his colours to the raising defence spending materially. I had a look at how Capital Gain Tax and Banks could be seen as low-hanging fruit. Fiscal discipline is a prerequisite but the Chancellor has to go a lot further and enact the kind of supply side reform that will lower the cost of doing business - reforms that will lower energy prices, lower the cost of building a home and so on. That will be the surest way to growing out of the current fiscal precariousness and providing a credible path for the market to narrow the risk premium on gilts and UK assets.