Bond traders warn Healey's plan to slash fiscal headroom would 'not be received well' as Budget pressure mounts

From the Newshound archive · first published 24 September 2026 · last updated 25 September 2026.

Chancellor John Healey is weighing a reduction in his fiscal buffer before the October 28 Budget, a step designed to relieve pressure for a third successive year of tax rises. Public sector borrowing came in at £18.3bn in August, overshooting the Office for Budget Responsibility's forecast by £3.5bn and ranking as the second-highest figure ever recorded for that month. A worldwide bond sell-off has pushed 10-year gilt yields to 5.38%, near a 19-year high, wiping out over half of the £24bn headroom Rachel Reeves had built up in March.

Shadow Chancellor Andrew Griffith said Labour has shown 'rare fiscal incontinence' by hitting a record tax take while borrowing still surged.

Franklin Templeton's David Zahn warned cutting headroom would lead gilt markets to question 'the UK government's commitment to longer-term fiscal stability'.

Prime Minister Andy Burnham admitted in New York this week he is 'conscious' of how much Labour has already raised in revenue across two Budgets.