Healey, who was appointed chancellor of the exchequer in July when Andy Burnham became prime minister, said the Iran war was not something the British government wanted.

As a result, he said his “choice in the budget today is to give families and businesses some breathing space now,” as the consequences of the conflict in the Gulf played out.

“For families, that means higher prices at the pump, higher energy bills and higher mortgages,” he said in his statement, arguably the key set piece of the parliamentary calendar. “For businesses, higher running costs and more expensive loans. And the impact is felt in the public finances too. Driven by the conflict in the Middle East, government borrowing costs across the G7 are reaching highs not seen for decades.”

Energy price support package takes center stage

Among the support measures announced in the early stages of Healey’s speech was a 100-pound ($133) one-off payment this winter that will help 20 million lower- and middle-income households.

Other measures included the extension of a cut in the sales tax on electricity bills and the abolition of a charge paid on gas bills.

Energy bills are set to spike sharply in the coming months. The Iran war and the ensuing bottlenecks in the Strait of Hormuz have squeezed global oil and gas supplies, pushing prices higher.

With the public finances already stretched, Healey announced some tax rises to pay for the measures.

One source of revenue is to come from the banks, which have benefited from higher interest rates. Healey increased the surcharge on their profits from 3% to 6% but only for 15 months from January.

“Amid global economic storms, I am looking to our banks to help fund breathing space for British families,” he said.

Another revenue source will come from the gambling sector by increasing the machine games duty.

Economic backdrop is mixed

Healey said the British economy has been more resilient than anticipated this year and will grow by 1.2% in 2026, more than previously predicted.

However, he says inflation is higher than predicted earlier this year and likely to remain so for the coming year or two.

Inflation in the U.K. has risen to a near one-year high of 3.5% and is expected to rise further in the coming months. As a result, the Bank of England is expected to raise interest rates soon, which will further raise the costs to the government of servicing its debt.

Outside of the energy price support, Healey’s overall budget was low-key, especially at a time when bond markets are fretting over debt levels around the world. France has been in the spotlight recently following a wave of protests that have exposed the parlous state of its finances.

Debt remains the main constraint

The main problem facing Healey is the same as that which confronted his predecessor Rachel Reeves, who was chancellor after Labour returned to power in a landslide election victory — the country’s debt mountain.

Even though the trajectory of the public finances was recently given a nod of approval from the International Monetary Fund, the U.K.’s debt has passed 3 trillion pounds ($4 trillion) for the first time ever, requiring 8% of government spending to service it.

Healey said that in forecasts provided by the independent Office for Budget Responsibility, the U.K. will spend 14 billion pounds more on debt interest this year.

“Those are the storms we face,” he said. “We can’t wish them away.”