2026 Autumn Budget - the economic picture

Within his Autumn Budget speech, Chancellor John Healey announced an extension to the VAT cut on electricity through the winter and an extra 3% on the bank surcharge.

28 Oct 2026

Within his Autumn Budget speech, Chancellor John Healey announced an extension to the VAT cut on electricity through the winter and an extra 3% on the bank surcharge.

The economic forecast published by the Office for Budget Responsibility (OBR) gives a decidedly mixed outlook on the strength of the UK economy. It anticipates the economy will grow by 1.2% this year, falling to 1% in 2027. This decline represents a sharp drop from previous predictions of 1.6% growth. The OBR expects the economy to grow by 1.6% in 2028, 1.8% in 2029 and 1.7% in 2030.

In its report, the OBR said that rising energy prices and interest rates have driven higher government borrowing. It said: 'Higher inflation and interest rates drive up the forecast for government borrowing. Budget decisions further increase borrowing in the near term and reduce it in the medium term. As a result, borrowing is forecast to fall to around 2% of GDP in the medium term.'

Additionally, the Chancellor reduced the Treasury's fiscal headroom to £15 billion in 2029/30 from the previous figure of £23.6 billion.

Mr Healey commented: 'We are using some headroom from last year to absorb the impact of the Iran war to protect the family budget.

'That is what a buffer is for. Use it when you need it, rebuild it when you can.'