Client Update - 16th October 2026

The government’s budget is not far away now on the 28^th October and while early optimism from the new administration centred on delivering growth and stability, attention has increasingly turned to the challenges facing the public finances and the difficult choices that may now be required. Does this sound familiar? Heightened government debt costs have put pressure on our new chancellor and UK growth has been falling, at just the wrong time.

The key question is whether John Healey opts for short-term fixes or uses his first major fiscal event to set out a longer-term strategy for taxation, spending, and economic growth. The UK's public finances are under pressure from several directions. Economic growth has been weaker than hoped, inflation remains a concern, and government spending demands continue to rise across areas such as healthcare, public services, and defence.

At the same time, borrowing costs remain elevated, increasing the expense of servicing government debt. This limits the government's flexibility and strengthens the case for measures designed to improve fiscal sustainability.

One option available to the Chancellor would be to postpone major decisions until a future Spending Review, relying on a collection of smaller revenue-raising measures while maintaining existing spending plans. Although this approach may reduce immediate political pressure, it could create uncertainty. Markets tend to react negatively when governments are perceived as delaying difficult fiscal decisions, particularly when future tax increases or spending cuts appear inevitable. For financial markets, credibility matters. Investors generally prefer a clear fiscal strategy that demonstrates how spending commitments will be funded and how debt will be managed over the longer term, as ongoing uncertainty can also discourage investment and make longer-term financial planning more challenging.

The first Budget of a new government often provides the greatest opportunity to introduce significant reforms. With a fresh mandate, ministers typically have more political capital to implement measures that may be difficult later in the electoral cycle. However, Burnham has not been elected by the public. The question is therefore not simply whether taxes rise, but whether any changes are introduced as part of a coherent and predictable long-term strategy. A long term, serious growth plan, would be very welcome.

While no policy announcements have yet been confirmed, recent comment has focussed on Capital Gains Tax, Inheritance Tax, Income tax thresholds and allowances and the ISA savings framework.

In periods of fiscal uncertainty, it is important to avoid making hurried decisions based solely on speculation. History shows that anticipated tax changes do not always materialise, and reacting too early can sometimes create unintended consequences. However, the Budget does reinforce several enduring financial planning principles. It is always sensible to ensure investment portfolios remain aligned with long-term objectives, not short-term noise. In our role as financial planners, we will always make full use of your available tax allowances and exemptions and in a world of constant policy change, a regular review of your estate, portfolio and succession planning remains key. Do have a good weekend.