I watched John Healey’s first Budget yesterday with one question in my head: would this be the day the Burnham government stopped explaining what it wants and started moving? In the Commons, at least, I don’t think it was. The Spectator’s James Heale counted 98 measures, a record, and most of them were small enough to fit on a till receipt. A £100 payment towards the energy bills of households in council tax bands A to D. Gas standing charges folded into the unit rate. The trading allowance tripled to £3,000. The fuel duty cut kept going until July.
None of that is wrong, and some of it will matter a lot to the families who get it. It just wasn’t what the country was in the mood for. In the fortnight before the speech, YouGov asked 2,010 business decision makers what they expected, and 52% said the Budget would leave firms worse off. Only 15% thought it would help. Kemi Badenoch’s reply was that it was not bold enough, and I suspect a fair number of Labour voters quietly agreed with her on that one point.
Where I part company with her is on where to look. I went back over the coverage this morning, and the part that stayed with me was Healey on the mayors. From 2027 they keep a fifth of the business rates collected in their areas, and by the end of the decade he wants that to be all of it. From 2028 they get a slice of income tax as well, a levy on overnight stays, and a £1.5 billion facility they can borrow against. He called it “the most radical act of devolution in a generation”. Chancellors say that sort of thing. This time I think he may be right, as long as the Treasury still means it once the Spending Review is done.
What was actually in it
Strip out the noise and the Budget does three things. It puts a little cash into households, it takes a little more from savers, landlords and banks, and it leaves the big taxes alone.
On the household side, the biggest item is the £100 energy payment. It costs £2.6 billion and goes straight into the bank accounts of up to 20 million homes in England from January, and Scotland, Wales and Northern Ireland get their share through Barnett. Anyone on the minimum wage gets 3.9% more, which takes the National Living Wage to £13.20 an hour, and pensioners on the full new state pension will get £250.70 a week. If you own a small shop, a pub or a gym, the threshold for small business rates relief goes up from £12,000 to £18,000. Healey reckons that means about half of them won’t pay rates at all.
The money for all this comes mostly from three places. Banks pay three more points of surcharge for fifteen months. Savers and landlords pay two more points of income tax on that income from April 2027, so a landlord in the higher band will hand over 44% of the rental profit. And the higher-stakes gaming machines pay more duty. Healey left income tax on wages, National Insurance and VAT alone, which is what Labour’s manifesto promised.
Tax Policy Associates published its reading of the costings the same day. The new tax measures raise about £19 billion in real terms over six years, which sounds like a lot. Set it against the bigger picture, though. By 2030/31, on their numbers, the tax take will be about £123 billion higher in today’s money than if nothing had changed since 2021, and only around £6 billion of that is down to yesterday. On the OBR’s figures the tax burden reaches 38.5% of GDP by the end of the decade, up from about 33% before Covid. So for a new Chancellor’s first go, his hand was very light.
The forecast that set the limits
Why so light? Mostly because of the forecast Healey was handed. The OBR now expects the economy to grow by 1.2% this year and by just 1.0% in 2027, when in March it had pencilled in 1.6% for 2027. Reuters points out that the March numbers were drawn up before the Iran war started, and you can see the war all over the new ones. Inflation is expected to average 3.5% next year and only get back to 2% in 2028, and the OBR has Bank Rate going up from 3.75% to 4.25% by the middle of 2027. David Miles of the OBR described the outlook for living standards as “pretty grim”. A decade on from Covid, households will be little better off than they were before it.
Then there is the debt. Interest costs are up £14 billion this year on the OBR’s numbers, and Badenoch’s best line in reply was that Britain now spends more on debt interest than on the army and schools put together. Ten-year gilts were trading at around 5.3% while Healey was on his feet. MoneyWeek’s live coverage put his headroom against the fiscal rules at about £15 billion in 2030, down from £23.6 billion in March. So a Chancellor who has spent the autumn talking about growth has very little money left to buy any.
I wouldn’t be too quick to sneer at that. Had he spooked the gilt market in his first Budget, he would have lost the room to do anything else, devolution included, and Liz Truss is still a recent enough memory for everyone in the Treasury. There is a logic to his caution. My problem is that caution, however sensible, does nothing to a growth forecast of 1%.
The part that was not small: money for mayors
So, to the part I think matters. Centre for Cities set out the fiscal devolution roadmap the same evening, and it runs like this. From 2027-28 mayors move onto business rates retention, starting at 20%, and that replaces several of the grants Whitehall hands out today, among them mayoral capacity funding and local growth funds. From 2028-29 they get a share of income tax, with the amount to be fixed at the Spending Review. Strategic authorities, including those without a mayor, can charge an Overnight Visitor Levy. From April 2028 the mayoral authorities can draw on a £1.5 billion borrowing facility. The Mayoral Capacity Fund goes up by £150 million in 2027-28, and £285 million of seed money goes to Good Growth Funds.
Alongside the money there is the map. Ten more devolution deals are close to agreement, among them Devon, Plymouth and Torbay, Hertfordshire, Lancashire, Surrey, Thames Valley and Wessex. The government wants the whole of England covered by the end of 2028, and Centre for Cities reckons more than 90% of the English population will soon live under a deal.
Why do I care so much about this? It changes the question a mayor gets up in the morning to answer. At the moment a mayor in West Yorkshire or the West of England spends a good part of the year bidding to Whitehall for pots of money, each with its own forms and its own deadline. Under the roadmap, if the mayor gets a new distribution centre built or a half-empty business park filled, part of the rates and part of the income tax from those jobs comes back to the area. German Länder and French regions have long had a version of that link between local growth and local money. English cities have mostly gone without it. Back in June I argued that the mayoral half of England’s reorganisation was the half worth defending. This Budget starts to give that half a tax base of its own.
All four corners of the UK
People like to say growth has to come from all four corners of the country, so it is worth being precise about what this does for each of them. Holyrood has been setting Scotland’s income tax bands since 2017, and Wales got its own rates two years later. Northern Ireland has its Assembly and its Executive. For all three, most of yesterday’s Budget arrives the old way, as Barnett money that follows decisions taken for England. The part of the UK with almost no say over its own taxes is England itself, home to more than four in five of the UK’s people and still run, in fiscal terms, from one building on Horse Guards Road.
That is the gap the roadmap starts to close. Reuters, citing the OECD, reports that only about 6% of UK tax revenue is raised below national government, against roughly 20% in France and about half in Germany and the United States. Even with full business rates retention and a decent share of income tax, England’s mayors will be a long way from a German Land. The direction of travel would, though, finally match the one Scotland, Wales and Northern Ireland took in 1999.
Andy Burnham ran Greater Manchester for the best part of a decade before he moved into Number 10, and he calls this rewiring the British state. Put more plainly, his case is that a country with one economic engine will always run slower than a country with a dozen. Birmingham, Leeds, Newcastle and Plymouth would each have their own reason to go after investment, alongside the devolved governments in Edinburgh, Cardiff and Belfast, instead of waiting for London’s surplus to be sent back up the line.
The case against, and the 2015 promise
I should be honest about the case against, because it is a strong one. We have been here before. On 5 October 2015 George Osborne announced that councils would keep 100% of their business rates by the end of that Parliament, and the Treasury’s own press release called it a devolution revolution. It never arrived. A decade later most councils in England were still on 50% retention, with only some pilot areas keeping more. Reuters made the wider point yesterday: prime ministers have been promising to close the gap between the regions since the 1960s, and the gap has barely moved.
The last time
October 2015: councils in England to keep all of their business rates by the end of the Parliament.
A decade later most councils were still on 50% retention, with pilot areas keeping more. Sources: HM Treasury, 5 October 2015; MHCLG, 100% Business Rates Retention evaluation.
There are details missing, too. Nobody yet knows how big the income tax share will be, and nobody will until the Spending Review. Full business rates retention by the end of the decade is something Healey wants, which is a long way from it being law. And business rates are a tax on property, so a place full of offices and warehouses gains far more from keeping them than a place with very few. Without a fair way of topping up the weaker areas, retention could widen the very gap it is meant to close. Cambridge and Milton Keynes would do nicely out of it. Hartlepool and Blackpool would not.
Then there is capacity. Centre for Cities welcomed the extra £150 million for mayoral offices precisely because powers are no use without people who can use them: planners, transport engineers, people who know how to put together a borrowing case. Business owners have a fair worry of their own. A hotel group with sites in five combined authorities could end up with five different visitor levies and five sets of local rules, where today it deals with one.
What to watch from here
Whether any of this works depends on numbers we don’t have yet. Burnham knows the territory better than most. Greater Manchester has been one of the pilot areas keeping all of its business rates since 2017, and I suspect that experiment, more than any speech, is where his confidence comes from. The question now is whether the Treasury will repeat it across England. If next year’s Spending Review gives mayors an income tax share worth having, and the grants are not cut faster than the new money comes in, a mayor in the West Midlands or the North East has for the first time a financial reason to chase every new employer. I’d expect to see that in planning decisions and transport schemes well before it shows up in GDP.
If the Treasury is tight-fisted about it, we get the opposite. With headroom of around £15 billion, officials will be tempted to hand over the responsibility and hang on to the cash, and mayors will take the blame for buses and housing they still can’t pay for. There is a quieter risk as well, that the reform goes through, the richer areas pull ahead, and the top-up for the poorer ones slips by a year, and then by another.
If you run a business, there are four things I’d keep an eye on over the next year. How big the income tax share is when the Spending Review lands. Whether there is a proper top-up for the weaker areas. Which of the ten new deals actually get signed. And what the first projects put to the borrowing facility turn out to be. You’ll learn more from those about where to put your money than from anything Healey said yesterday.
The verdict
So, was it bold enough? As a Budget, no, and I doubt Healey would put up much of a fight on that in private. Businesses wanted to come out of the speech feeling the handbrake was off. What they got was a careful Chancellor working within a 1% growth forecast and keeping an eye on gilt yields while he spoke. I can see why he played it that way, though I don’t expect his caution to be what people are discussing in 2036.
The devolution roadmap could be. If it holds, by the end of the decade Greater Manchester, the North East and the West Midlands, and soon after them most of England, will keep a real share of the tax their local economies produce, on top of what the Scottish, Welsh and Northern Irish governments already control. That is a different way of running the UK from anything in living memory, and to my mind it is the one part of yesterday that could do anything about that 1% forecast.
Sources: Reuters via Euronext, UK economic growth downgraded to 1% in 2027, Healey says in first budget, 28 October 2026; Reuters via Euronext, UK sets out fiscal devolution plan to boost economic growth, 28 October 2026, for the devolution measures, the Chancellor’s quotes and the OECD comparison; Centre for Cities, Four things we learned from John Healey’s budget about regional growth, 28 October 2026; MoneyWeek, Autumn Budget live, 28 October 2026, for household, tax and energy measures, the OBR forecasts, headroom and gilt yields; Tax Policy Associates, Budget 2026: what it means, 28 October 2026; YouGov, 2026 Autumn Budget: businesses, 21 October 2026; The Spectator, James Heale, John Healey’s Nero Budget was a missed opportunity, 28 October 2026; BBC report as republished by Shango Media, Healey unveils £100 for energy bills and bank tax in first Budget, 28 October 2026, for the opposition responses and David Miles; HM Treasury, Chancellor unveils devolution revolution, 5 October 2015; Ministry of Housing, Communities and Local Government, 100% Business Rates Retention evaluation; The Caterer, Hospitality reacts to the 2026 Autumn Budget, 28 October 2026, and LabourList, Budget 2026 reaction, 28 October 2026, for wider reactions. The Budget documents and the full OBR Economic and fiscal outlook should be checked against these figures once read in full; where a figure comes from live coverage, it is labelled as such in the text.
UK bodies in this field: Office for Budget Responsibility; HM Treasury; Ministry of Housing, Communities and Local Government; Centre for Cities. Listed for reference; no affiliation is implied.
