Healey aims for £15bn fiscal cushion while planning £5bn in new taxes

City economists anticipate that Chancellor John Healey will present a primary fiscal headroom of roughly £15bn, a decline from the £23.6bn buffer reported in the Spring Statement before recent Middle-East conflicts disrupted oil markets. The reduction reflects higher debt-interest payments, defence commitments and inflation pressures. To offset the shortfall, the Budget is expected to include tax increases of about £5bn, targeting online retailers, gambling, banking profits and closing the tax gap, according to Deutsche Bank's Sanjay Raja.

Morgan Stanley and Pantheon Macroeconomics warn that bond markets will scrutinise the plausibility of the broader fiscal strategy and any near-term borrowing, rather than the headline headroom. Healey is also likely to announce temporary cost-of-living measures such as extending the fuel-duty freeze and a warm-homes discount. The overall fiscal outlook will hinge on how the government balances spending needs with the need to maintain investor confidence.