The UK Budget: help with energy bills, a thinner safety margin

What happened

John Healey delivered his first Autumn Budget as Chancellor on 28 October. Its biggest new spending was on energy bills: a £100 rebate for households in council tax bands A to D, paid from January 2027, and the removal of gas standing charges from 2027. The rebate scheme alone costs about £2.6bn. The 5p cut in fuel duty was extended to July.

To pay for part of it, a temporary extra tax on bank profits rises to 6% for 15 months, and gambling duties rise. Taxes on property and savings income go up by 2 points from April 2027.

The Office for Budget Responsibility, the official forecaster, raised its growth forecast for 2026 slightly, to 1.2%, but cut later years, partly because of higher interest rates and inflation.

What "headroom" means

The UK government has a rule: within five years, day-to-day spending must be covered by tax revenue. The headroom is how far the plans are from breaking that rule. In March it was £23.6bn; this Budget used part of it, leaving £15bn.

The trouble is how small that is compared with the size of the risks. Slightly higher interest rates or a slightly weaker economy can wipe out billions of pounds of room in a single forecast, which is why a thin buffer tends to keep markets nervous between Budgets.

Why gilt investors watched it so closely

The government borrows by selling gilts. With 10-year yields above 5%, close to their highest since 2008, debt interest is now one of the fastest-growing items of spending. Investors' main fear before the Budget was a loss of discipline; the measures were modest and largely funded, and the 10-year yield stayed around 5.3% during the speech, MoneyWeek reported. Calm, for now.

Where it sits in the chain

Government finances feed into Link 4, bond yields. When investors trust the plans, they lend at lower rates; when they doubt them, the cost of borrowing rises for the government first, then for mortgages and companies.

What to watch

• The Bank of England's decision on 5 November.
• Monthly borrowing figures, and whether interest costs keep surprising on the upside.
• Gilt yields over the next weeks, as investors digest the OBR's full report.