Autumn Budget 2026: Wary Healey presents a Ming Vase Budget

John Healey delivered a modest 'first do no harm' Budget, featuring a few favors for households and businesses without any alarming news for investors. The only noteworthy aspect was a £100 household energy payment for 20 million households in council tax bands A-D, at a cost of £2.6 billion. However, this merely substituted a previously rumored expansion of the Warm Home Discount.

The Chancellor had already rejected many of his colleagues' more radical proposals, such as equalizing capital gains and income tax or introducing a new wealth tax, recognizing that neither would generate substantial revenue.

Two seemingly bold moves were still made. First, Healey reduced fiscal headroom from around £24 billion to £15 billion in 2029-30, gradually rebuilding it to £22 billion in 2030-31. This gamble assumed markets would accept it as a sensible way to prevent further tax hikes due to a potentially temporary energy crisis. So far, this gamble appears to have paid off, with bond yields remaining stable, although UK government borrowing costs still rank among the highest in the G7.

Additionally, tax increases of approximately £6 billion in 2029-30 were smaller than initially anticipated, representing about a tenth of what was announced by Healey's predecessor.

The second risky decision risked upsetting Labour activists by slowing the increase in the national minimum wage for younger workers. However, ample evidence suggests that substantial minimum wage hikes have decreased job opportunities, particularly in retail and hospitality. For the City, the main news was the modest increase in the bank surcharge on corporation tax, at just three percentage points for 15 months, which was less severe than feared.

Major banks' stocks even saw a slight rise. Healey also announced £15.4 billion in extra funding for the National Wealth Fund and £5 billion for the British Business Bank, two Public Financial Institutions (PuFIns). These measures have been labeled 'off balance sheet' funding, or even 'fiddling the books', as borrowing offset by acquiring a financial asset is neutral for the targeted debt measure.

While this criticism seems unfair, as these activities remain transparently on the balance sheet, there is a broader concern that more borrowing is still borrowing, regardless of its purpose. The state's track record of investing your money wisely is questionable. Overall, this was a 'Ming Vase Budget' – a cautious effort to avoid breaking anything, including Labour's poll lead, likely in the last major fiscal event before an early election.