Market Reaction And Budget Measures
Markets took the Budget largely in stride: bond yields eased, sterling was broadly flat and the FTSE 100 swung from earlier losses to trade 0.2% higher, helped by banks after the banking tax surcharge was set at 6% rather than 8% and limited to 15 months from January. Major lenders rose by about 3%, though the package also includes a £100 payment for households in council tax bands A–D to help with higher energy bills. Most measures were pre-announced, aside from a new ISA to be detailed later, leaving the Office for Budget Responsibility’s (OBR) projections as the main new information.
OBR Projections And Fiscal Outlook
The OBR lifted its inflation view while cutting the 2027 growth forecast by 0.5% versus March, with growth seen at 1.25% this year and 1% next year. It estimates borrowing will be more than £11bn higher on average per year over the rest of the parliament, and debt interest costs £15bn higher this year, while the planned 2029–30 fiscal surplus is met by only £15bn. Even with no rises in income tax, VAT or corporation tax, receipts are forecast to reach 42.9% of GDP in 2031–32, a record high.
