Autumn Budget: Healey weighs slashing fiscal headroom to reduce tax hikes

Chancellor John Healey is weighing whether to accept a smaller fiscal buffer in the next Autumn Budget as a way to reduce tax hikes, according to discussions reported by the Financial Times. The debate centers on whether the government should set a lower buffer than the Office for Budget Responsibility’s (OBR) figure published in March. A smaller headroom could give ministers more room to soften both tax increases and spending cuts scheduled for 28 October. The government’s key fiscal rule requires day-to-day spending to be covered by revenues by 2029/30. In March, the OBR estimated former chancellor Rachel Reeves would meet that target with a £23.6bn buffer. Gilt investors are split, with some arguing that higher yields tied to the war in Iran make rebuilding headroom difficult, while others say keeping it below £20bn could be risky.