Chancellor John Healey has indicated that the UK will face a challenging budget next month, with the conflict in Iran expected to have a strong influence on his first budget on 28 October.
Speaking to the Financial Times, Mr Healey, who became Chancellor in July, stated his intention to ensure the country has a robust "buffer against uncertainty" amid increasing global instability. He noted that events in the Middle East are impacting inflation, growth, and borrowing costs.
Economists have suggested that Mr Healey may need to raise taxes or implement significant cost-cutting measures to maintain the £24bn fiscal headroom established by his predecessor. The public finances are under pressure from soaring global bond yields, which recently hit an 18-year high, driving up government borrowing costs.
Mr Healey affirmed his commitment to cutting the welfare bill, stating, "We must cut the cost of welfare, we have to get more people back into work." He also acknowledged that the country and households are under pressure due to the cost of living.