Julian Jessop is an independent economist and Economics Fellow at the IEA.

As expected, John Healey delivered a low-key ‘first do no harm’ pre-election Budget, with a few treats for voters and no nasty surprises for investors. But a ‘do some real good’ Budget was needed.

The only ‘rabbit’ was a £100 ‘household energy payment’ for 20 million households in council tax bands A–D, costing £2.6 billion. But even this merely replaced a widely trailed expansion of the Warm Home Discount.

Healey also announced the scrapping of standing charges on gas bills (though not on electricity). This move will be financed by increasing the unit price of gas, so while lower users will benefit, higher users will pay more.

Most households will still see a huge jump in their energy bills next year, as the increases in wholesale costs are passed through.

The Chancellor had wisely already ruled out many of dafter ideas favoured by his colleagues, including equalising capital gains and income tax, and a new wealth tax. Despite the simplistic appeal of these ideas, the Treasury and OBR will have told him that neither would raise much money – if any at all.

Two decisions were still ‘brave’. The first was to cut fiscal headroom from about £24 billion to £15 billion in 2029-30, rebuilding it only partially to £22 billion in 2030-31.

Healey has gambled that markets would accept this as a sensible way to avoid further growth-damaging tax rises in response to what may only be temporary energy shock. What is the point of an emergency buffer if you do not use it?

So far, this gamble seems to have paid off: bond yields barely moved in the wake of the Budget, though UK government borrowing costs remain the highest in the G7.

The tax rises of around £6 billion in 2029-30 - including more raids on rental and non-ISA interest income – were also smaller than some had feared, and about a tenth of those nnounced by Healey’s predecessor.

The second brave decision risked angering Labour activists by slowing the increases in the national minimum wage for younger workers. However, there is ample evidence that large minimum wage hikes have reduced job opportunities, especially in retail and hospitality.

Meanwhile, the new economic and fiscal projections accompanying the Budget were grim. Healey tried to make the most of the marginal upgrade to the OBR’s growth forecast for this year, from 1.1% to 1.2%, but next year’s number was slashed from 1.6% to just 1.0%.

This wasn’t just about the external shocks which have driven up inflation, either. In particular, the OBR has given up on Labour’s housebuilding targets.

For the City, the main news was the increase in the bank surcharge on corporation tax. But at 3 percentage points for just 15 months, it was also smaller than some had feared, and major banks’ shares rallied slightly.

Otherwise, Healey confirmed £15.4 billion in additional funding for the National Wealth Fund and £5 billion for the British Business Bank, two Public Financial Institutions, or ‘PuFIns’.

Some call this ‘off balance sheet’ funding, or even ‘fiddling the books’, because borrowing offset by acquiring a financial asset is neutral for the targeted debt measure, PSNFL.

That criticism seems unfair: these activities remain transparently on the balance sheet.

But there is a much broader concern that more borrowing is still more borrowing, whatever its purpose, and the state’s record of investing your money wisely is dismal.

Overall, this was a ‘Ming vase Budget’. Healey has tried to avoid breaking anything – including Labour’s poll lead – in what may be the last major fiscal event before Burnham calls an early election.

Crucially, most of Burnham’s big ideas will require a new mandate. Some carry a hefty price tag, including a much larger role for the state in providing social care, infrastructure, utilities, and housing, while others would cross existing manifesto red lines, notably by seeking a much closer relationship with the EU.

In contrast, a ‘do some real good’ Budget would have rolled back the increases in taxes and regulations that have raised the cost of doing business in the UK, starting with employers’ NI and the Employment Rights Act.

It would also abolish the most damaging taxes, notably stamp duty on property and shares, or at least simplify and improve the tax system in revenue-neutral ways.

We also need a credible medium- to long-term plan to control public spending, requiring tough decisions on the state’s size and role.

The Chancellor simply pencilled in a big increase in defence spending, with no clue on how it would be funded,

Unfortunately, these tough decisions will probably have to wait until the next parliament, and possibly for a different government.

This is an extended version of a piece first published by CityAM on 28 October 2026.

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Wary Chancellor presents a ‘Ming vase Budget’