Healey's Budget needs to sustain the stronger economy through gathering clouds

There have been almost no Budget leaks.

The chancellor's aides are using intelligence-style security measures to guard its secrets: the Budget has been split into "compartments" with very few given access to all of them. There are codenames. The IT has been locked down and ministers viewing the plans have to sign a digital promise not to brief media.

Such security is a response to the feeling that speculation around the last Budget, sometimes informed by insiders, was economically destabilising.

As a recent former defence secretary, Chancellor John Healey has embraced such strict procedures, and has approached most of his public engagements and interviews with a sturdy refusal to break the Budget omertà, akin to his fellow Yorkshireman Geoffrey Boycott's at times ultra-defensive stance on a cricket pitch.

The economic news has been good - growth has been better than expected and the International Monetary Fund has endorsed the UK for "standing out" among the G7 countries for at least planning to cut borrowing.

The bond market's reverse beauty contest, in which investors single out the countries they distrust most, has moved on from Britain. Traders I occasionally hear from who were once focused on UK borrowing costs are now more preoccupied with "le spread" - the widening gap between French and German borrowing costs (the former being higher than the latter) - and with America's long-term debt outlook.

And yet there are clouds on the horizon. The inflation rate rose more than forecast to 3.5% in September, and borrowing numbers were also higher than forecast. This means an imminent Bank of England rate rise is very much on the cards, with the resultant rise in mortgage repayments for some.

Credibility with investors requires not just that Budget maths add up on Wednesday, but also belief that growth plans are realistic, and the perception that Downing Street can actually convince MPs to pass its Budget.

The question for John Healey is whether he can deliver a Budget that can sustain the revival in growth and offer the help with the cost of living that his backbenchers demand. At the same time he needs to reassure the markets that his budget will keep a check on borrowing.

The curious case of the UK economy

"Is it resilient, or is it actually strong?" has been the tone of the debate among economists about the curious case of the UK economy ahead what is a vital Budget.

The UK is the fastest growing G7 country so far this year, at 0.6% in Q1 and 0.5% in Q2. The widespread assumption of stagnation in the second half is being defied with Q3 heading for 0.6 to 0.8%.

Each quarter has seen growth twice as fast as predicted by the Office for Budget Responsibility (OBR) in March and independent forecasters. This is the fastest growth in the first eight months of a year since 2017, ignoring the post-lockdown re-opening.

It's more resilient than it was in 2022. Back then, the Ukraine war, massive energy bailouts, and Liz Truss' mini budget all culminated in the UK facing the highest borrowing costs in the G7, in what was derided in financial markets as a "moron premium".

Then last year, with constant policy u-turns, UK borrowing costs rose the most of the G7.

This year the gap has narrowed, as uncertainty about the US and France takes centre stage, but all advanced economies are feeling the heat from the Iran war energy shock.

Inflation has risen, but not just in Britain. Reforms to the electricity market have weakened the link between gas and electricity prices, meaning spikes in gas prices have less impact on electricity bills than they used to and helping to keep inflation lower than it otherwise might have been.

The fact that up until now the Iran war has been more of an oil shock than a gas shock (where the UK is more exposed) has been another saving grace. Meanwhile, the significant amount of AI and tech investment in the UK is another boost to the economic numbers.

The net result is that doom-mongering predictions of recession, of being hit worst by the Iran war, and, in some quarters, of imminent national bankruptcy, have been defied.

That economic defiance of the early part of 2026 has persisted in the first three months of the Burnham-Healey tenure in Downing Street, buoyed by a lull in the Iran war and the energy price shock.

Burnham was advised upon entry to Downing Street that if consumers could at least feel more confident, they might save less and spend more and therefore help boost growth.

So far Burnham and Healey appear to be relying on a series of relatively inexpensive "feel-better" policies - such as capped bus fares and a temporary VAT cut on household energy bills - that have improved confidence without significantly increasing spending.