UK chancellor faces borrowing and confidence choices ahead of October Budget

Chancellor John Healey is due to present the Budget on 28 October alongside new forecasts from the Office for Budget Responsibility. In July, he pledged to abide by the government’s fiscal rules and retain a buffer against uncertainty, including instability in the Middle East. [2]

Writing for BBC News on 26 September, economics editor Faisal Islam identifies two big judgments facing Healey. The first is how long the economic pressures from the Iran war might last: should the chancellor make lasting tax and spending choices now, or allow borrowing to absorb some of the strain? Islam suggests one option would be to accept a reduction in what he describes as £24bn of headroom left by Healey’s predecessor, Rachel Reeves. Headroom is room against the fiscal rules, not money set aside to spend. [1]

The borrowing figures show why that choice matters. The UK borrowed £77.3bn between April and August, £2.2bn less than in the same period last year but £8.1bn above the OBR forecast. Borrowing in August alone was £18.3bn, up £2.9bn on August 2025. [4]

Islam’s second question is how to sustain an improvement in economic confidence through what he calls a challenging Budget. GfK’s consumer confidence index rose one point to −13 in September, although one of its five measures fell. [1] [5] The picture is mixed: a separate S&P Global measure edged down from 42.9 to 42.7, as reported by Retail Gazette, while the Bank of England’s business contacts described consumer spending growth as moderate and mainly driven by prices. [12] [7]