Prime Minister Andy Burnham and Chancellor John Healey face a difficult autumn budget as weaker economic conditions, higher inflation and the Iran war constrain their options. Burnham has retained Labour’s fiscal rules and manifesto pledge not to raise income tax, national insurance or VAT, limiting the scope for additional spending or tax cuts while seeking to reassure financial markets.

Rachel Reeves left £23.6bn of fiscal headroom, but higher debt-servicing costs on almost £3tn of national debt and sluggish growth could reduce it, particularly while the Strait of Hormuz remains closed. Energy prices have risen 4%, offsetting the VAT cut on bills; a targeted support scheme for households earning under £25,000 could cost about £2bn, while the government has delayed setting a timetable for defence spending of 3% of GDP and must still fund major defence commitments.