Chancellor John Healey's Budget cut household energy bills and left £15bn of headroom, down from £23.6bn. With the 10-year gilt yield near 5.32% and September CPI at 3.5%, a Bank of England hike on 5 November is still in play.
Julian Jessop notes gilts barely moved after Healey spent the fiscal buffer, even as the UK still pays the highest G7 borrowing costs. Source
Chancellor John Healey's first Budget used up some of the fiscal cushion to bring down household energy bills. The Office for Budget Responsibility (OBR) puts headroom against the stability rule, which requires day-to-day spending to be covered by revenue, at £15bn in 2029/30. That is down from £23.6bn in March, though it rises to £22bn in 2030/31. Healey's answer was that a buffer exists to be used. The Monetary Policy Committee (MPC) announces its decision on 5 November, a week from now, so the Treasury is easing just as the central bank prepares to tighten.
