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UK chancellor flags tough first budget as Iran war lifts borrowing costs
He said the Iran conflict could heavily shape his budget on 28 October, as global bond yields reached an 18-year high and are pressuring inflation, growth, and government financing.
UK Chancellor John Healey warned that the country is likely to face a tough first budget next month, citing market and economic pressure linked to the Middle East conflict. In an interview with the Financial Times, Healey said the Iran war would probably have a strong influence on his first budget scheduled for 28 October.
Healey said he wants the UK to have a robust buffer against uncertainty amid what he described as increasing global instability, and he said he is working in lockstep with Prime Minister Andy Burnham to stay within fiscal rules. He declined to specify how much fiscal headroom he is aiming for.
The Financial Times said Healey is expected to face constraints around the roughly £24 billion fiscal headroom that Rachel Reeves left after her March statement, with economists forecasting the need for either higher taxes or significant spending cuts. Healey said the conflict in the Middle East is hitting inflation, growth, and borrowing costs.
The article also pointed to soaring global bond yields, which it said hit an 18-year high earlier this week. It noted that higher yields raise the cost of government borrowing and worsen pressure on public finances, and that Healey has faced criticism for not committing to a goal of raising defence spending to 3% of GDP by 2030.