John Healey to Set Out Labour’s First Budget Amid Fiscal Strain

What changed

Chancellor John Healey will deliver Labour’s first Budget on 28 October 2026, setting out its tax and spending plans alongside an economic forecast from the Office for Budget Responsibility. The government has not ruled out tax rises, but its options are constrained by promises not to increase income tax, National Insurance or VAT.

Why it matters

The Budget’s central problem is arithmetic. Labour wants to support households and meet defence-spending commitments while keeping its promises to avoid borrowing for day-to-day spending and to reduce debt as a share of national income by the end of the parliament.

That leaves less room than the government had expected. In March, the OBR put the available buffer at £23.6bn. Higher borrowing costs are expected to have reduced it, although estimates differ: KPMG puts the remaining headroom near £12bn, while the Institute for Fiscal Studies puts it closer to £20bn after allowing for stronger tax receipts from higher wages.

Healey could therefore face a choice between raising more money and accepting a thinner safety margin. That decision will shape how much support the government can offer without breaking its own fiscal rules.

Several measures remain possible rather than settled:

• Banks could face a higher profits surcharge, currently 3%, or a larger levy based on their balance sheets.
• First-time buyers in England could get more detail on the Your First Home scheme, including a 2.5% deposit and a loan worth 20% of the property’s value for a new-build home.
• Capital Gains Tax could change. The rates cited are currently 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers.
• Online marketplaces such as Amazon and eBay could be made responsible for collecting tax owed by traders using their platforms.

The useful dividing line is between policy and possibility. The OBR’s assessment and the Treasury’s costings will show the actual fiscal position on 28 October; until then, the headline measures are still being negotiated against a shrinking and disputed buffer.