Budget 2026: key points at a glance
Chancellor outlines fiscal rules and growth forecasts while addressing impact of war in Iran on UK economy
Quick Look
- Chancellor John Healey presented his first budget, emphasizing fiscal discipline and addressing global economic pressures, including the war in Iran.
- The OBR forecasts GDP growth of 1.2% this year and projects government debt to fall as a percentage of GDP by 2030-31.
AI-generated summary
Why It Matters
The budget is presented against a backdrop of global economic instability and the ongoing war in Iran. The government aims to adhere to strict fiscal rules regarding tax receipts and debt reduction.
Healey’s opening remarks
John Healey starts by saying that his budget is “delivered at a time when global uncertainties and pressures are swirling worldwide and hitting people here at home”.
He says the administration will have a new approach to steer us through global economic storms and give people fresh hope for Britain’s future.
He says it is an honour to deliver a budget as chancellor, before paying tribute to Rachel Reeves’s fiscal discipline. She took the difficult decisions required, he says.
Trade tensions are acting as a drag on global economic growth, as is the war in Iran, he says. The UK did not want this war, and it has driven up costs for British families through higher energy costs and higher interest rates.
The UK will spend £14bn more on debt interest this year.
Fiscal discipline is his first priority as chancellor, Healey says.
Peter Walker, senior political correspondent: A very immediate précis of the main political points of his first budget, with Healey talking up “breathing space” on the cost of living and a break from the Keir Starmer era, but also a mention of the “global uncertainties” which – and he cannot say this – might make his tweaks and changes slightly moot. This is set out more explicitly with a long section on the Iran war, and a note that the UK did not seek it.
Growth and inflation forecasts
Healey says he will meet the fiscal rule that day to day spending must be covered by tax receipts and the investment rule that government debt, defined as public sector net financial liabilities, must be falling as a percentage of GDP in the third year of the forecast.
The government will have £15bn of headroom in 2029-30 and £20bn in 2030-31, according to the Office for Budget Responsibility, the government’s forecaster.
Government borrowing will be 4.2% of GDP this year, 3.4% next year, then 2.9% and 2.1% 1.8% by 2030-31, the OBR says.
Predictions of slowing growth were wrong, Healey says. The OBR says GDP will grow by 1.2% this year, 1% next year, 1.6% in 2028, 1.8% in 2029, 1.7% in 2030, 1.6% in 2031. In March the OBR had predicted GDP growth of 1.1% in 2026, rising to 1.6% in 2027 and 2028, and dropping to 1.5% in 2029 and 2030.
Government debt is forecast to be 83.2% of GDP this year, 83.8% next year, and then falling to 83.1%, 82.3% and 81.7% in the following years.
Open Questions
- How will the government manage specific tax changes?
- What is the long-term impact of the war in Iran on UK energy policy?
