For the data behind the commentary, download the full August 2026 UK Economy & Housing Report.
First MONTH
A month into the new administration, there have been a number of policy changes.
The announcement of John Healy as Chancellor was the first change – an appointment which reassured the bond markets. The early measures have been deliberately tangible and comparatively cheap: a £2 cap on single bus fares in England, the removal of VAT from household electricity bills for six months from 1st October, and a pledge to end rough sleeping. On housing, the ambition is larger - the biggest council housebuilding programme since the Second World War, with the £39 billion Social and Affordable Homes Programme reportedly to be steered towards local authorities and unused public land unlocked for social and council homes.
On devolution, the English Devolution and Community Empowerment Act 2026 is already on the statute book, with regional leaders expected to receive a share of some national taxes, including potentially income tax from 2028, allowing mayors to borrow against those income streams.
For property taxation, the near-term picture is one of continuity. Burnham has ruled out scrapping council tax or stamp duty, or merging them into a single property tax, at this stage, and stamp duty will not be reformed at this year's Budget, though he continues to argue for ‘fairer’ taxation and has pointedly highlighted the regional inequity of the current council tax bands.
While economic growth has been positive, fiscal constraints have not eased. Government debt sits near 100% of output, borrowing costs are above most advanced economies, and the tax burden is heading for record levels. With growth this year projected at around 1%, the gap between the ten-year ambition and the fiscal envelope is the thing to watch, and any spending increase without a matching tax package would still push bonds out.
Furthermore, the risk to inflation has re-emerged as a result of the increased hostilities between the US and Iran, with little visibility of a resolution. The MPC’s June expectation was for CPI to be running at ~3% in Q3 on the basis of lower energy prices. The renewed hostilities mean that Q3 and Q4 inflation could run higher and push back the return to target until mid-2027.
