ISSUE NO. 63 · FRIDAY 30 OCTOBER 2026

The OBR puts Healey’s odds at 56%, gilts fell two basis points on the news, and Lloyds made £2.3bn as the surcharge lands

The Office for Budget Responsibility gives John Healey a 56% chance of meeting his own fiscal rules. That is before the £11bn it says he must find after 2029 to stop day-to-day spending shrinking. A coin toss with a bill attached.

The market took the opposite view and did nothing: ten-year gilts moved two basis points. The gap between those two readings is the whole of today. Investors are pricing the next three years; the watchdog is pricing the three after that. Lloyds booked £2.3bn and watched its shares fall anyway.

Below: the odds on the rules, what the bond market made of it, what a bank does with a surcharge, then the numbers, the diary, and one calculator.

Lead

Barely better than a coin toss: the watchdog puts the odds on his own fiscal rules at 56%.

The £11bn is what it would take to stop day-to-day spending falling 2.6% in real terms between 2029 and 2032. Tom Josephs of the OBR put it as borrowing more now and deferring the restraint. Growth next year is cut from 1.6% to 1%, inflation revised up to an average near 3.4% in 2027, and unemployment forecast to reach 5.1%, roughly 440,000 more people out of work. Deutsche Bank’s Sanjay Raja puts the real gap, with defence and social care after 2030, at £40bn. Read the full story →

The Numbers

Bank Rate has not moved since December and the Bank meets next week. Inflation is still 3.5%. The FTSE 100 edged up on Wednesday.

More News

A Budget that did very little got the reward it wanted: the ten-year yield slipped, and the thirty-year slipped further.

Two basis points on the ten-year and six on the thirty, a basis point being a hundredth of a percentage point, so this is applause measured in whispers. Andrew Wishart of Berenberg called it a placeholder Budget and noted the bond market accepted the delay without complaint. The Debt Management Office nonetheless raised planned gilt sales for 2026-27 to £250.6bn from £246.2bn, an extra £4.4bn. The condition is in the OBR’s own workings: they assume a 3% cut to departmental spending next year, which Wellington Management’s Eoin O’Callaghan called unrealistic. Read the full story →

Lloyds made £2.3bn before tax, nearly double last year, and the shares fell more than 3% anyway.

The comparison flatters: last year carried an £800m motor finance charge. Underneath, costs came in at £2.37bn, £28m below consensus, for a cost-to-income ratio of 47.2% against the 48% expected, so the beat came from spending less rather than earning more. Net interest income rose 10% to £11.1bn and the margin widened 17 basis points to 3.21%, the engine of a mortgage-and-current-account book. Return on tangible equity hit 19.5%. From January the surcharge goes to 6% for fifteen months. Read the full story →

The Brief

• The OBR Forecasts Describe a Country in Slow Decline — Living standards barely recover by 2030.
• UK Tax Burden Will Stay at Record Highs for Years — A record share of the economy.
• High Street Business Rates Rise £250m Despite Freeze — Bills rise £250m even with the freeze.
• Gambling Duty Rise Costs Grosvenor Owner £9m a Year — Rank puts the bill at £9m a year.
• Founder’s Relief Could Break the Law Firm Partnership — The new 10% rate cuts across partnerships.
• The Budget Quietly Bets on More North Sea Drilling — The forecast assumes more drilling.
• Defence Financing Plan Waits for the Spending Review — The route to 3% is still only a date.
• Energy Bills: £100 Payment for 20m Homes in January — It reaches bank accounts in January.
• Ministers’ Own Rules Are Slowing UK Housebuilding — The OBR blames red tape for slower building.

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On the Diary

• Today, 9.30am GMT — UK National Accounts, the Blue Book. The ONS’s annual rebuild of the national accounts, which can revise the GDP figures the Budget forecast rests on.
• Thursday 5 November — the Bank of England’s rate decision. The first MPC meeting since the Budget, with inflation above target and growth marked down.

The Toolbox

One tool from the site each issue, picked to fit what has just happened. Free, no sign-up, and it shows its workings.

Redundancy Pay Calculator

“If the OBR is right about unemployment, this is the sum that matters: what statutory redundancy pay comes to on age, salary and years served.”

The Close

The watchdog and the bond market read the same Budget and disagreed. Investors were asked a question about the next three years and liked the answer; the OBR was asked about the three after that and gave him odds. Both can be right. He finds out which was pricing the thing that mattered when the spending review lands.

Hit reply and tell me which of the two you would back — I read every one.

MJB