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United Kingdom · Markets · Inflation & data · Source: HM Treasury (GOV.UK)
UK Budget adds energy help and a bank tax rise; OBR sees 3.5% inflation in 2027
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Summary: In his first Budget on 28 October 2026, Chancellor John Healey announced energy-bill and fuel support for households, paid for partly by a temporary doubling of the bank profits surcharge. The Office for Budget Responsibility (OBR) cut its 2027 growth forecast and raised its inflation outlook, mainly because of higher energy prices and interest rates.
What happened
Measures in HM Treasury's summary include:
- Energy: a £100 Household Energy Payment in 2027 for up to 20 million households in bands A to D in England, with funding for similar support elsewhere in the UK. The temporary VAT cut on electricity bills is extended to 1 July 2027.
- Banks: the Bank Corporation Tax Surcharge rises from 3% to 6% for 15 months, raising £1.5 billion, and then ends on 31 March 2028.
- Fuel: the 5p fuel duty cut is extended for six months, and the planned RPI-linked increase is deferred to 1 July 2027.
- Savings and property income: tax rates on these rise by two percentage points across all bands from April 2027.
- Wages: the National Living Wage rises 3.9% to £13.21 an hour from 1 April 2027.
Background
The OBR's central forecast has CPI inflation at 3.5% in 2027, compared with the 2% it expected in March, with a quarterly peak of 3.75% in early 2027. It expects GDP growth of around 1.25% in 2026, slowing to 1% in 2027. Borrowing is forecast at 4.2% of GDP this year and to fall to 1.8% by 2030-31. Debt is expected to peak at around 97% of GDP in 2028-29.
The OBR said the government's fiscal mandate – a surplus on the current budget in 2029-30, which the Treasury calls its stability rule – is met by a margin of £15 billion. The Treasury said this headroom is £9 billion lower than in March, a fall it said was more than accounted for by the impact of the Middle East conflict on debt interest costs. According to Reuters, the OBR said the plans, together with higher inflation and borrowing costs, would add £65 billion to borrowing over five years. Reuters quoted OBR official David Miles as saying: "It's a pretty grim picture."
Why it matters for markets and crypto
The Budget shapes UK government borrowing, which in turn affects gilt yields and wider borrowing costs. Reuters reported that 30-year gilt yields fell by as much as 5 basis points to 5.691% on the day (market pricing). The Treasury's Budget summary does not mention crypto-assets, so the news relates to the wider economy rather than to digital assets directly.
What to watch next
- Next week: the Bank of England's policy meeting, which Reuters said markets are watching after the Budget.
- 2027: a Spending Review, at which the Treasury says it will set out further decisions, including on defence spending. Reuters reported that bigger policy changes may also come in a 10-year plan promised by the Prime Minister.
Sources
- HM Treasury, "Budget 2026: Breathing space for today, hope for the future", 28 October 2026
- Office for Budget Responsibility, "Economic and fiscal outlook – October 2026" (via GOV.UK), 28 October 2026
- HM Treasury, "Budget 2026 speech", 28 October 2026
- Reuters via Euronext, "In first budget, UK's Healey tries to shelter households from economic storms", 28 October 2026
- Reuters via Euronext, "British markets take Healey's first budget in their stride", 28 October 2026
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