Autumn Budget 2026: Key takeaways and update after Labour conference week

Zeitgeist: "The last time we had a Budget from someone called Healey we ended up with the IMF." It's 50 years since the UK had to go cap in hand to the IMF for a bailout. To many watchers of such matters the fiscal outlook facing the Chancellor today is worse than it was for Denis Healey back in 1976. North Sea oil began to flow in ‘76 and the UK doesn’t anything like it to lean on. And the national debt is almost twice as high relative to GDP compared to 1976.

With four weeks to go until the Budget on 28 October and the Labour conference out of the way it's a good moment to take stock of where we are at in terms of the outlook for the UK economy, the fiscal situation and the political machinations ahead of the Budget.

Gilt market blowout: 30yr yield hits 6%

First up, the market context. UK gilt yields have blown out further this week, swept up in a global bond rout that shows no signs of slowing down. Very little so far is down to Burnham or the Chancellor, John Healey. The yield on the 30yr gilt topped 6% for the first time since 1998, while the 10yr yield rose above 5.5% to come within touching distance of its highest since 1999. The week saw the government pay the highest yield on a 10yr gilt auction since 1999.

This means the Chancellor is facing an even sharper downgrade to his fiscal headroom, making the challenge of balancing the books even more acute. The surge in yields in recent weeks will at least halve the fiscal buffer, which stood at £23.6bn in March.

Bond markets are telling governments to rein in spending; the mood at the Labour conference was not reflective of the reality in the market. I don’t see how this is anything but negative for gilts relative to peers.

Big promises

Prime Minister Andy Burnham doesn't seem to mind; his speech was heavy on hope and vibes. Implicit was more spending; good old Labour tax-em and spend-it until the pips squeak. Bond vigilantes be damned; there's a new sheriff in town. Burnham rolled the dice and called for big changes - a reset with the EU that could even see a new in-out referendum and sacrificing the pension triple-lock sacred cow at the altar of a new National Care Service; and more devolution and more public control of services.

The grand vision here matters – Burnham wants to increase the role of the state, which will require more spending. But he knows he can't bring the party, let alone the country, around to his vision today. He's going to need a mandate to this and he's going to require an election to get one.

Public ownership

The government intends to introduce a new Water Bill to repeal Margaret Thatcher's 1980s ban on the public ownership of water utilities. This sets out a 10-year path toward greater public control over utilities, starting with struggling entities like Thames Water.  It will also enable the existing state energy company Great British Energy to invest in grid connections through a new subsidiary called Great British Grid.

Early election

The Budget is likely going to be a placeholder event and Burnham will seek to use this as a staging post to setting out his ten-year plan (we kind of already know what this looks like now) and onto an election.

The calculation is to make the most of the momentum he has now to build a vision, paint a picture of the sunlit uplands and highlight the constraints of the current manifesto. The task is to get through the Budget relatively unscathed. 

Triple>double-lock>social care?

A centrepiece of the Burnham speech was a commitment to end the triple lock. It's a credible and welcome step, at least in terms of the fiscal outlook. The reforms are not even in a manifesto yet, but they would save billions from the welfare bill over time. Changes to the triple lock stop unfunded rises in state pension spending after 2030. It ends the ratchet effect that meant pension spending rose faster than GDP, but it does not release a chunk of cash from under the sofa to pay for social care. Tax rises will be needed, unless further savings can be uncovered.

Really, Healey?

John Healey's speech was short on detail. It teed up Burnham to deliver his longer-term vision without being overly encumbered by policy decisions and fiscal maths that need sorting today. The Budget may be similarly lacking in anything likely to rock the boat. Why bother when you are about to call an election in order to win the mandate to do some really big things? 

The plan is to get through the Budget as unscathed possible so Burnham can reveal his 10-year plan and ride the wave of hope to go back to the electorate to win the election with a more manageable number of backbenchers and, crucially, give Burnham a 5-year mandate to do what he likes.

But the fiscal arithmetic is getting trickier for Healey – household energy prices are about to surge again, and the Bank of England is really starting to worry about second-order effects on inflation as energy prices just won't come down.

Zero focus on growth

Notably absent is a pretence of growth-fixation. Most prime ministers talk about economic growth like it's air. Burnham seems minded to let plans to build the third runway at Heathrow quietly die, for example. He wants "good growth", whatever that means. It suggests that credible supply side reforms that make the cost of labour, capital and energy lower, are not top of his agenda. 

Help to Buy

Indeed, why fix the supply side when you can simply boost demand? Which takes us neatly to the news that Help to Buy is indeed being resurrected, as anticipated here. This delivered a big bump up for housebuilders.

Banks called in

Healey is said to be calling in the bosses of Britain’s biggest banks for a pre-Budget summit. The leaders of Barclays, HSBC, Lloyds and NatWest are among those called to attend the meeting, next Tuesday. Healey could be softening them up for another bank tax grab. I had a look at why banks' soaring profits make them easy targets for the Chancellor.