Chancellor John Healey faces a Budget with no easy options, according to Emeritus Professor Joe Nellis, Head of Economic Research at accountancy and advisory firm MHA, in a piece published by Edinburgh Chamber of Commerce on 28 October 2026.
Nellis said the Chancellor must restore confidence in public finances while improving living standards and stimulating business investment, adding that “generating economic growth within the existing fiscal constraints will be a formidable challenge”. He said government borrowing costs have risen sharply, with UK bond yields the highest among G7 countries, while the tax burden approaches a post-war high.
According to Nellis, the Chancellor is likely to take a cautious approach combining spending restraint, targeted tax increases and selective household support, while reaffirming existing fiscal rules. He said the Government will stick to its pledge not to raise income tax, employee National Insurance or VAT rates, but that continued freezing of personal allowance thresholds until April 2031 will drag more taxpayers into higher bands.
Nellis said banks and oil companies are the most likely targets for additional levies, noting that the top four UK banks made £29 billion in pre-tax profits in the first half of 2026, and that the Treasury could recoup as much as £5 billion from each sector. He said a rise in capital gains tax has reportedly been ruled out, though removing a break on inherited asset gains is being considered and could raise £2 billion a year.
On spending, Nellis said Healey is expected to back away from reaching defence spending of three per cent of GDP by 2030 despite announcing billions in new funding, and that NHS and public service budgets will remain tightly constrained. He said Scottish ministers will watch UK spending decisions closely, since they determine Barnett formula funding for Holyrood’s own budget, and that Scottish firms will be seeking UK-wide measures to simplify regulation and encourage capital investment.