Beyond the UK Budget 2026: Dr Eric Balki on the Next Steps for Growth, Productivity and New Ideas

Following the UK's October 2026 Budget, Dr Eric Balki discusses the government's fiscal decisions and outlines proposals intended to support productivity, investment and regional economic development. His analysis offers one perspective on the trade-offs facing policymakers, with projected fiscal outcomes dependent on assumptions that have not been independently validated.

John Healey’s first Budget, on 28 October, kept its promise of fiscal discipline. The Office for Budget Responsibility (OBR) judges the stability rule met with £15bn to spare in 2029-30, down from £23.6bn in March, rising to £22bn in 2030-311,2. Tax measures were modest, about £6bn by 2029-303, and gilt markets barely moved, with ten-year yields near 5.3%4. One economist called it a “first do no harm” Budget3.

In Dr Balki’s view, growth is where it fell short. The OBR cut its 2027 forecast to 1.0%, from the 1.6% it expected in the spring5, and debt interest spending is rising by £14bn this year6. The Chancellor had promised to move “money and power out of Westminster, and into every postcode around Britain”7. On the OBR’s numbers, there will be less of both to move.

Before the Budget, Dr Eric Balki set out a package designed to raise growth without raising the main taxes, in which, on his modelling, each grouped measure is net positive for the public finances, subject to his assumptions. With the Budget published, he compares the two and argues for a different approach next time.

Dr Balki holds degrees in physics, finance law and management (King’s College London, University of Law, Lancaster University), a PhD in aging and longevity, and is an honorary research fellow. He founded businesses in longevity science, healthcare and deep-tech infrastructure, and worked in AI and supercomputing in the North East, building early natural language processing models the predecessors of LLM’s. He designed KHIS, which managed almost £500M of third-sector activity for the region’s five universities, and worked in finance before moving into healthcare leadership and launched the regions first Beowolf Super Computer funded by the European Regional Development Fund.

His work on Basel IV has identified a “latency gap” between market and oversight speeds, and warns of algorithmic herding as similarly trained models reach the same conclusion at once. Two of its threads run through this one.

The diagnosis has not changed

He starts with productivity, not tax. UK output per worker grew 2.0% a year in 1971–2007 but 0.2% in 2010–20248; market-sector growth in 2008–2025 was roughly 0.5% a year against 1.7% in the US9. NIESR calculates that resuming the pre-2008 trend from 2010 would have left output per head around 17% higher8.

“Imagine what closing a seventeen per cent productivity gap could do. That is a major part of the fiscal problem, and another tax raid cannot fix it.”

Debt stability depends on the gap between the effective interest rate on debt and nominal growth. With debt at £2.98 trillion, about 94% of GDP10, forecast by the OBR to peak at about 97% in 2028-292, and ten-year gilts above 5%4, small shifts in that gap matter enormously.

The swing between the outer cases, on a gap under two percentage points, is £53bn of fiscal space a year: almost nine times the roughly £6bn this Budget raised in tax by 2029-30.

He calls the favourable case the Virtuous Wealth Cycle: the feared debt spiral in reverse. Growth lifts receipts, narrows the deficit and compresses the term premium; debt service falls, headroom widens, tax pressure recedes, investment responds and growth rises again.

“The mechanism is identical. Only the sign is different. Britain has been running the first version since 2008 and calling it prudence.”

£12.81

Judged against that test, the Budget managed the numerator reasonably competently. It kept borrowing on track and left the main tax rates alone, but it did little to change the denominator: nominal growth.

Measure by measure

The table sets his proposals beside what the Budget announced. On graduates and regional devolution the Chancellor moved partly in the same direction as his proposals. Elsewhere the Budget either did nothing or moved in the opposite direction.

Budget column: HM Treasury1, The Negotiator11, Propertymark12, ITV6, Wonkhe13, Tax Policy Associates14, A&O Shearman15.

Where Dr Balki Sees Missed Growth Opportunities

Rental supply. The Budget raised income tax on property income by two points from April 2027, to 24%, 44% and 49%12. Tax Policy Associates notes the OBR thinks this “more likely than not” to push up rents14. It lands on a market where Zoopla reports 3% fewer homes to rent than a year ago, with rents forecast to rise 4–5%16. Stamp duty was left untouched11.

Dr Balki would cut stamp duty where extra sales repay most of the cost. HMRC’s ready reckoner suggests the additional-dwellings surcharge is already past its revenue peak: raising it by another point would lose £45m a year, and raising the 12% band would lose £25m17,18. Tax Policy Associates says the combined effect of these very high bands and surcharges is uncertain17, so the offsets below are his own modelling assumptions, not independently verified estimates. The Exchequer also relies on the tax less than it did: stamp duty land tax was 2.2% of HMRC receipts in 2006-07 and 1.6% in 2025-26, when it covered only England and Northern Ireland19. The Treasury raised the surcharge in 2024 expecting 130,000 more first-time and main-home purchases over five years20; critics will argue a cut hands that advantage back to investors. He would accept a three-year trial.

While reducing stamp duty could encourage property transactions and potentially increase rental supply, the wider economic effects remain uncertain. Critics of lower transaction taxes for investors argue that such measures could increase competition for housing and make homeownership less accessible to first-time buyers. The impact on government revenue would also depend on how strongly property transactions respond to lower rates. These considerations highlight the trade-offs policymakers would need to evaluate before introducing such reforms.

The result, on his figures: around 50,000 extra transactions a year among investors and second-home buyers, adding rental homes, with the Exchequer marginally better off.

Investment. The Budget raised the first-year allowance for new plant outside full expensing from 40% to 50%, but cut the main writing-down allowance to 12%. Tax Policy Associates calculates that relief on second-hand assets and existing pools falls from 77.4% to 74.1% of cost14. Fixed plant such as power and process equipment still counts towards a factory’s rateable value21. Dr Balki would exempt manufacturing plant and machinery from rating, extend full expensing to unincorporated businesses including farms, move solar panels and heat pumps to a 100% first-year allowance, and lift the structures allowance from 3% to 6% for industrial, agricultural and aviation buildings. The £1.45bn cost is met by raising the high-value multiplier a further 5p and cutting its threshold from £500,000 to £300,000 for distribution and fulfilment use, yielding £1.60bn. Net: +£0.15bn.

“Solar panels get a fifty per cent allowance, then six per cent a year. A new lathe gets a hundred. If you want businesses generating their own power, the tax code must point the right way.”

Energy security. The Iran conflict drove the downgrade, yet the Budget’s main North Sea decision was to legislate a permanent 35% Oil and Gas Levy that takes over only when the Energy Profits Levy expires, by April 203015. Offshore Energies UK said “2030 is too late”, with more than 100 projects waiting22. Dr Balki would permit short-cycle tiebacks to existing infrastructure that pay back within five years, about £0.37bn a year at the current 78% marginal rate23, and cut exposure to imported energy. A 2% Green Transition Levy on UKCS revenue (£0.40bn) would be fully hypothecated to a Biofuels and Hydrogen Fund, so fiscally neutral by design.

The Budget contains no measure on bioethanol1, the issue that animates him most. Hull’s Vivergo Fuels closed on 31 August 202524, putting at risk a planned £1.25bn sustainable aviation fuel investment25; Teesside’s Ensus plant at Wilton was mothballed a month later26. Both followed removal of a 19% tariff on US bioethanol27. In March 2026 the government backed a temporary restart of Ensus, reportedly worth around £100m28,29,30, after the Iran conflict threatened a CO2 shortage26,31. The government has not confirmed that figure31,32.

“The plant was closed by a trade deal and reopened by a war. That is not industrial policy. That is weather. Government has the tools and infrastructure to support local industries, and must.”

Planning. The Budget offers councils an AI planning assistant by the end of 2027 and promises further steps in a 10 Year Plan1. Dr Balki’s largest growth line is a parallel “5E” consent route for schemes positive on energy, environment, economy, employment and ecology, with a statutory deadline and one consolidated consultation. He scores it at £0.30bn rising to £2.30bn by year five, below the £3.4bn the OBR attributed mainly to planning reform in 202533, reflecting delivery risk.

“This is not deregulation. It is a faster route for projects that clear a higher bar. If you want speed, make the timetable certain.”

Graduates and regions. Here the Chancellor moved partly towards his early suggestions. Graduates of highly compliant universities keep a two-year route, though others drop to 18 months and the international student levy goes ahead13. Devolving business rates and a share of income tax to mayors6 fits the “every postcode” promise, but it devolves revenue rather than creating a reason to hire. His zones would offer near-zero employer National Insurance for five years on certified net-new jobs in Middlesbrough, Carlisle, Hull, Greater Manchester and Newcastle upon Tyne: about £10,300 per additional job on his assumptions, against over £30,000 for earlier enterprise zones34.

“We are damaging a twelve billion pound export industry35 to move a statistic that never measured what the public thought. Students are temporary by visa condition; counting them as settlement is a category error with a fiscal cost.”

The package for the next Budget

Dr Balki now offers suggestions for the next Budget, in autumn 2027. Measures would start in April 2028, so Year 1 is 2028-29 and Year 5 is 2032-33. Had it been adopted on 28 October, each year would be one earlier, running from 2027-28 to 2031-32.

Note on financial projections

The following projections are based on Dr Balki's and his teams own illustrative economic modelling. They have not been independently assessed or certified by the Office for Budget Responsibility (OBR), and actual fiscal outcomes could differ substantially.

“If a proposal only works because something else in the package funds it, the Chancellor will drop the funding half and keep the giveaway. Every line has to stand on its own feet, or it will not survive contact with the Treasury.”

One line is pure revenue. The Digital Services Tax charges 2% on large search, social media and marketplace platforms’ UK revenues, and raised £944m in 2025-2636. Dr Balki would double the rate to 4%, on revenue earned from the April after the Budget, as the original tax applied from April 2020. On the 2025-26 base that adds £944m a year; he deducts about 6% for avoidance and restructuring, giving about £0.89bn before any discount, then cuts that by a quarter for the risk of US retaliation under Section 301, under which Washington found the tax actionable in 202137. That leaves £0.67bn a year. The £0.40bn in Year 1 is his assumed phased yield, 60% of a full year. That is slightly more cautious than HMRC’s costing when the tax was introduced, in which the first full year (£280m) was 72% of the second (£390m)38.

All figures are Dr Balki’s illustrative estimates in £bn; positive improves the public finances.

The growth line assumes trend growth 0.15 percentage points higher by Year 5, lifting GDP 0.44% above baseline, taxed at 37%. The debt interest line assumes 25 basis points of term premium compression on the OBR’s sensitivity of roughly £12bn per percentage point after five years39. The Students line has been kept at its original value, although the Budget has already restored the two-year route for some graduates.

Does it meet the fiscal rules?

The fiscal rules are judged in a target year. This Budget was assessed against 2029-30; the next will be assessed against 2030-311. In both cases that is Year 3 of the package, so the test uses Year 3 figures, not Year 5.

Headroom adds Dr Balki’s estimates to the OBR’s October 2026 figures for the stability rule: £15bn in 2029-30 and £22bn in 2030-311. The OBR has not assessed the package, and its 2030-31 figure will be revised at the next Budget.

This is the real claim. Remove the growth dividend and market response, credit planning reform with nothing, and on his figures the package still improves the public finances by about £2bn in the target year and £2.3bn by Year 5. Each scenario shown in his model has a positive net effect.

However, the projected fiscal benefits depend on assumptions about economic growth, investment responses, government borrowing costs and policy implementation. Changes in market conditions, weaker-than-expected investment or delays in delivering proposed reforms could lead to different outcomes. Although Dr Balki's scenarios suggest positive fiscal effects, these projections have not been independently validated by the Office for Budget Responsibility.

What could go wrong

The 25% Section 301 haircut on the Digital Services Tax may prove optimistic; Washington renewed its tariff threat over the tax in April 202640. Displacement above 35% would erode the jobs case. Planning consent is necessary but not sufficient: construction capacity, materials and finance all bind. And if markets don’t understand the plan, the term premium widens, inverting the debt interest line.

“A blueprint has to present optimism and balance the numbers. The remainder is just having the courage to execute, and learn from any failures early.”

The wheel, turning the other way

The Budget left income tax, VAT, National Insurance and corporation tax rates untouched. The Budget raised taxes on bank profits and on savings and property income. Dr Balki argues that his package would remove taxes on transactions, machinery, skilled young people and building, replacing them with charges on activity that does not compound.

Britain has spent fifteen years managing the numerator, building every Budget around cuts or rises. A framework built for a slower world risks not only failing to prevent a crisis but producing one. With 2030-31 as its target year, the next Budget has room to work on the denominator.

The projected £12.81 billion improvement in the public finances by 2032–33 is based on Dr Balki's illustrative economic modelling, including assumptions about economic growth, tax receipts, borrowing costs and the implementation of proposed reforms. The figure has not been independently verified or certified by the Office for Budget Responsibility (OBR) and should not be interpreted as an official government forecast).

Sources

Note on the Ensus figure: the figure of around £100m was first reported by the Financial Times on 26 March 2026 and was widely repeated in the trade and regional press [28–30]. The government’s own announcement [26] and written ministerial statement [31] give no cost. In July 2026 the Department for Business and Trade declined a Freedom of Information request for the figure, saying the spending would be published in its annual report and accounts [32]. The article therefore describes the figure as reported, not confirmed.

[1] HM Treasury, “Budget 2026: Breathing space for today, fresh hope for the future”, 28 October 2026 (stability rule met by £15bn in 2029-30 and £22bn in 2030-31, “the target year at the next Budget”; PlanAssist for councils by end-2027). https://assets.publishing.service.gov.uk/media/6ae20b9039d29f3f9b9b3f55/E03668986_HMT_Budget_2026_TEXT_PRINT__1_.pdf

[2] Investment Week, “Budget 26: OBR cuts fiscal headroom to £15bn by 2029/30 after Middle East shock”, October 2026 (OBR forecasts; net debt to peak at about 97% of GDP in 2028-29). https://www.investmentweek.co.uk/news/4537991/budget-26-obr-cuts-fiscal-headroom-15bn-2029-middle-east-shock

[3] J. Jessop, “Autumn Budget 2026: Wary Healey presents a Ming Vase Budget”, City AM, 28 October 2026 (tax rises of around £6bn in 2029-30). https://www.cityam.com/?p=2472516

[4] Trustnet, “Credible, uneventful, boring: How the experts reacted to Healey’s first Budget”, October 2026 (ten-year gilt yield about 5.3% after the Budget). https://www.trustnet.com/news/13487487/credible-uneventful-boring-how-the-experts-reacted-to-healeys-first-budget

[5] City AM, “Budget: Healey hikes taxes and delays defence spending as economy set to slump”, 28 October 2026 (OBR 2027 growth forecast 1.0%, down from 1.6%). https://www.cityam.com/budget-healey-hikes-taxes-and-delays-defence-spending-as-economy-set-to-slump/

[6] ITV News, “Rise in bank tax and £100 energy payments: What’s in Healey’s debut Budget?”, 28 October 2026 (debt interest spending up £14bn this year; devolution measures). https://www.itv.com/news/2026-10-28/chancellor-john-healey-reveals-what-is-in-his-first-budget

[7] HM Treasury, “Budget to move ‘power and money out of Westminster, and into every postcode around Britain’”, press release, 31 July 2026. https://www.gov.uk/government/news/budget-to-move-power-and-money-out-of-westminster-and-into-every-postcode-around-britain

[8] National Institute of Economic and Social Research, “Are there early signs of a UK productivity revival?”, 17 February 2026. https://niesr.ac.uk/blog/are-there-early-signs-uk-productivity-revival

[9] Bank of England, Bank Underground, “Is UK productivity growth low? A historical and cross-country perspective”, 27 August 2026. https://bankunderground.co.uk/2026/08/27/is-uk-productivity-growth-low-a-historical-and-cross-country-perspective/

[10] Office for National Statistics, “Public sector finances, UK: August 2026”, September 2026. https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/bulletins/publicsectorfinances/august2026

[11] The Negotiator, “Autumn Budget 2026: What did Chancellor Healey announce for the housing market?”, October 2026 (no change to stamp duty rates, thresholds or surcharges). https://thenegotiator.co.uk/news/regulation-law-news/autumn-budget-2026-what-did-chancellor-healey-announce-for-the-housing-market/

[12] Propertymark, “Budget 2026 raises landlord taxes as new support targets first-time buyers”, October 2026 (property income tax up 2 points from 6 April 2027). https://www.propertymark.co.uk/resource/budget-2026-raises-landlord-taxes-as-new-support-targets-first-time-buyers.html

[13] Wonkhe, “Team Wonkhe unpacks John Healey’s first budget as chancellor and what it means for the sector”, October 2026. https://wonkhe.com/blogs/everything-in-the-2026-budget-for-higher-education-and-students

[14] Tax Policy Associates, “Budget 2026: what it means”, 28 October 2026. https://taxpolicy.org.uk/2026/10/28/budget-2026-what-it-means/

[15] A&O Shearman, “UK Autumn Budget 2026: tax overview”, October 2026 (capital allowances; Oil and Gas Levy at 35% replacing the Energy Profits Levy by 31 March 2030). https://www.aoshearman.com/en/insights/uk-autumn-budget-2026-tax-overview

[16] Property Industry Eye, “Rental supply falls for first time in three years as rents accelerate”, September 2026 (Zoopla Rental Market Report). https://propertyindustryeye.com/rental-supply-falls-for-first-time-in-three-years-as-rents-accelerate/

[17] D. Neidle, “Why do we still have stamp duty?”, Tax Policy Associates, 9 June 2026 (citing HMRC’s ready reckoner). https://taxpolicy.org.uk/2026/06/09/why-do-we-still-have-stamp-duty/

[18] HM Revenue & Customs, “Direct effects of illustrative tax changes”. https://www.gov.uk/government/statistics/direct-effects-of-illustrative-tax-changes/direct-effects-of-illustrative-tax-changes-bulletin-january-2025

[19] Property118, “HMRC cash in post stamp duty holiday” (HMRC SDLT receipts £9,635m in 2006-07); HMRC annual tax receipts bulletin, September 2026 (total receipts £428.6bn in 2006-07 and £937.8bn in 2025-26; SDLT £15.16bn in 2025-26). https://www.property118.com/hmrc-cash-in-post-stamp-duty-holiday/

[20] Deloitte Taxscape, “Autumn Budget 2024: Stamp duty land tax – higher rates for additional dwellings” (130,000 additional first-time and main-residence purchases expected over five years). https://taxscape.deloitte.com/measures-autumn-budget-2024/stamp-duty-land-tax---higher-rates-for-additional-dwellings.aspx

[21] Valuation Office Agency, “How non-domestic property, including plant and machinery, is valued”, GOV.UK. https://www.gov.uk/guidance/how-non-domestic-property-including-plant-and-machinery-is-valued

[22] Energy-pedia, “2026 Budget missed bigger opportunities, says Offshore Energies UK”, October 2026. https://www.energy-pedia.com/news/united-kingdom/2026-budget-missed-bigger-opportunities-says-offshore-energies-uk-205867

[23] Aberdeen & Grampian Chamber of Commerce, “Nightmare on Downing St: Chancellor hikes tax on North Sea firms to 78%”, October 2024. https://www.agcc.co.uk/news-article/nightmare-on-downing-st-chancellor-hikes-tax-on-north-sea-firms-to-78

[24] Biofuels Digest, “Vivergo Fuels begins shut down process after UK government fails to support”, 18 August 2025. https://biofuelsdigest.com/?p=205469

[25] Insider Media, “Vivergo Fuels days away from closure without government agreement”, 13 August 2025 (Meld Energy’s £1.25bn letter of intent). https://www.insidermedia.com/news/yorkshire/vivergo-fuels-days-away-from-closure-without-government-agreement

[26] Department for Business and Trade, “Government safeguards critical UK CO2 supplies with restart of plant”, press release, 26 March 2026 (no cost stated). https://www.wired-gov.net/wg/news.nsf/articles/Government+safeguards+critical+UK+CO2+supplies+with+restart+of+plant+30032026131000

[27] Farmers Journal, “UK’s largest bioethanol plant set for closure”, August 2025 (19% tariff removed on 1.4bn litres of US ethanol). https://www.farmersjournal.ie/uk-s-largest-bioethanol-plant-set-for-closure-881869

[28] The Chemical Engineer, “UK backs temporary restart of bioethanol plant amid CO2 shortages”, March 2026 (around £100m; citing the Financial Times). https://www.thechemicalengineer.com/news/uk-backs-temporary-restart-of-bioethanol-plant-amid-co2-shortages

[29] The Grocer, “Government gives £100m bailout to chemical giant Ensus to restart CO2 gas production”, 26 March 2026. https://www.thegrocer.co.uk/news/government-gives-100m-bailout-to-chemical-giant-ensus-to-restart-co2-gas-production/716971.article

[30] Teesside Live, “Redcar Ensus plant to reopen with help of £100m Government grant”, 26 March 2026 (citing the Financial Times). https://www.gazettelive.co.uk/news/teesside-news/redcar-ensus-100m-grant-reopen-33661847

[31] UK Parliament, “Government intervention on CO2 supply”, written ministerial statement HLWS1506, 13 April 2026 (no cost stated). https://questions-statements.parliament.uk/written-statements/detail/2026-04-13/hlws1506

[32] T. Pashby, “Government withholds cost to taxpayer of restarting nuclear power-critical CO2 factory”, 30 July 2026, republished by Nuclear News, 1 August 2026. https://nuclear-news.net/2026/08/01/1-b-government-withholds-cost-to-taxpayer-of-restarting-nuclear-power-critical-co2-factory/

[33] HM Treasury, “Spring Statement 2025”, 26 March 2025 (OBR: policies led by planning reform reduce borrowing by £3.4bn in 2029-30). https://www.gov.uk/government/publications/spring-statement-2025-document/spring-statement-2025-html

[34] Centre for Cities, “Job creation in the enterprise zones” (about £28,540 per net additional job in the 1980s zones, 2010/11 prices). https://www.centreforcities.org/reader/27856-2/job-creation-in-the-enterprise-zones/

[35] Paragon Law, “International students in UK higher education: trends and policy changes 2026” (international tuition fee income about £12.4bn in 2024/25). https://www.paragonlaw.co.uk/resources/international-students-uk-higher-education-trends-policy-changes-2026

[36] Bloomberg Tax, “Tech companies pay £944 million in UK digital services taxes”, 23 April 2026. https://news.bloombergtax.com/daily-tax-report-international/tech-companies-pay-944-million-in-uk-digital-services-taxes

[37] Office of the United States Trade Representative, “Report on the United Kingdom’s Digital Services Tax” (Section 301 investigation), 13 January 2021. https://ustr.gov/sites/default/files/files/Press/Releases/UKDSTSection301Report.pdf

[38] HM Revenue & Customs, “Digital Services Tax” policy paper, Budget 2020 (OBR-certified Exchequer impact: £280m in 2020-21, £390m in 2021-22; applies to revenue earned from 1 April 2020). https://www.gov.uk/government/publications/introduction-of-the-digital-services-tax/digital-services-tax

[39] Office for Budget Responsibility, “Debt interest (central government, net of APF)”, including debt interest ready reckoner. https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/debt-interest-central-government-net/

[40] investingLive, “Trump warns UK: drop digital services tax or face fresh tariffs”, 23 April 2026. https://investinglive.com/news/trump-warns-uk-drop-digital-services-tax-or-face-fresh-tariffs-20260423/