Economic forecasts and cost-of-living measures

Chancellor Healey said he was delivering his speech “at a time when global uncertainties and pressures are swirling worldwide and hitting people here at home,” but that his Budget would help “steer us through the global economic storms.” He noted the Office for Budget Responsibility (OBR) had raised its economic growth projection for 2026 from 1.1% to 1.2% but had also revised down its forecast for 2027 from 1.6% to 1.0%, an unexpectedly sharp decline.

The OBR’s Economic and Fiscal Outlook document highlighted ‘further adverse developments’ since its Spring Statement forecasts, explaining, ‘As a net importer of energy, the rise in energy prices constitutes a negative terms-of-trade shock for the UK, which pushes up on inflation and lowers real household disposable incomes.’ It expects Consumer Prices Index (CPI) inflation will remain above the Bank of England’s 2% target in 2026 and 2027, reaching 3.1% this year and rising to 3.4% in 2027.

OBR confirmed that borrowing has been markedly higher than expected this year, and will increase by a further £8bn in 2026–27, £4bn in 2027–28 and £0.4bn in 2028–29, before reducing thereafter. OBR noted that the outlook for the UK economy and public finances is uncertain and remains highly dependent on energy prices, ‘with significantly better or worse outcomes of broadly equal probability.’

More positively, the Chancellor highlighted that the International Monetary Fund (IMF) recently commended the UK for delivering the biggest reduction in borrowing out of the G20 countries this year, and was on track to have the lowest level of borrowing in the G7 from 2029.

With some announcements trailed prior to Budget Day, Mr Healey spoke about his intentions to ease the cost-of-living for UK households, outlining plans to scrap standing charges on household gas bills, replacing them with costs per unit, saving around two-thirds of households an average of £45 a year.

Other cost-of-living measures include extending the VAT cut on electricity to July and providing a £100 energy payment to up to 20 million households in Council Tax bands A to D in England, with funding for similar support provided to the rest of the UK. The 5p Fuel Duty cut and freeze are being extended to 1 July 2027, import tariffs will be removed on more than 100 supermarket products and self-employed fathers will become eligible for paternity pay for the first time. Changes to Carer’s Allowance will remove the earnings threshold “cliff edge” that has left some claimants facing substantial debts.

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All details are believed to be correct at the time of writing (28 October 2026)