On 28 October 2026, Chancellor John Healey will deliver the Autumn Budget, facing a defining challenge: how to kick-start economic growth, boost employment and raise the revenue needed to sustain vital public services.

With competing pressures on the public finances, the Budget will be a critical test of how the government balances ambition for growth with the need to fund the services on which the country depends.

Here, University of Salford experts explore the key issues facing the Chancellor, from balancing fiscal responsibility with economic growth to tackling AI inequality, supporting working people and ensuring the energy transition delivers fairer outcomes for local communities.

Balancing fiscal responsibility and economic growth

Dr Maria Paola Rana, Lecturer in Economics, University of Salford, comments: “With borrowing costs remaining high and commitments not to increase the main rates of income tax, VAT or employees’ National Insurance, the government has limited room for manoeuvre.

“One proposal under discussion is raising the tax-free personal allowance from £12,570 to £15,000, allowing millions to keep more of their earnings, although at a significant cost to the Treasury.

“To raise additional revenue, the Chancellor could increase capital gains tax, reduce existing allowances or introduce further taxes on wealth and high-value properties. The planned mansion tax threshold could also potentially be lowered from £2 million to £1.5 million.

“For businesses, corporation tax is expected to remain at 25%, although banks could face additional taxation. A planned 20% reduction in business rates for pubs, clubs and live music venues could be extended to restaurants and cafés, while targeted incentives could encourage employment and investment.

“Major additional pension tax changes appear unlikely, with reforms already scheduled for 2027 and 2029. Looking further ahead, the government has proposed changes to the state pension triple lock after the next general election, with potential savings intended to help fund a national care service. However, these proposals remain conditional on a future electoral mandate and their ability to generate sufficient funding remains uncertain.

“Overall, the Budget is likely to favour targeted tax measures rather than sweeping reforms. Beyond the immediate announcements however, lies a broader economic challenge.

“Maintaining sound public finances is essential to investor confidence, particularly amid high borrowing costs and global uncertainty. As highlighted by the Institute for Fiscal Studies (IFS), a credible fiscal framework should ensure financial sustainability while supporting sound long-term economic decisions. Excessive fiscal caution risks restricting investment in infrastructure, education, skills and innovation, potentially weakening productivity and future tax revenues.

“The UK’s economic outlook must also be considered in the wider context of Brexit. Its effects on trade, investment and productivity have added to existing structural weaknesses, while uncertainty over the UK’s relationship with the EU may influence international investors’ perceptions of its long-term prospects. In my view, addressing these challenges and strengthening economic ties with the EU are important for improving competitiveness and attracting investment.

“Regional development also has an important role to play. Andy Burnham’s experience in Greater Manchester illustrates how investment in transport, infrastructure and local economic initiatives can support productivity and reduce regional inequalities.

“Ultimately, the Budget’s success should be judged not simply by its ability to raise revenue or control borrowing, but by whether it strengthens investor confidence, improves productivity and creates the conditions for sustainable, inclusive economic growth.”

Building an AI-resilient economy

Professor Richard Whittle, Professor of Artificial Intelligence (AI) and Public Policy, University of Salford, comments: “In his Coventry growth speech last month, the Chancellor struck a more balanced note on AI than British politics has to date. He promised not to let the opportunity pass Britain by, nor to let the technology proceed without oversight.

“He admitted that AI will change the labour market in ways not even economists fully understand and told his party conference he would not let AI leave Britain’s workers behind. And he has made the state an early customer for British AI firms through a £100 million Sovereign AI procurement scheme.

“His caution is well founded. The Bank of England’s July Financial Stability Report modelled an AI-led correction in equity and credit markets that would knock 2.2 percentage points off UK output. The IMF’s latest Global Financial Stability Report puts an AI-related market correction first among three risks that could spark market stress.

“The Bank’s worry that AI borrowing is growing more complex and opaque echoes my research on how debt-financed booms build fragility. Those warnings justify the Chancellor’s insistence on a “buffer against uncertainty.”

“Yet there is still something missing. AI inequality doesn’t get much attention, but it should.

“Start with jobs. Nearly a million young people are not in education, employment or training, and Alan Milburn’s interim review warns that the first rung of the career ladder is thinning.

“Almost half of medium and large firms told the Work Foundation they had cut entry-level roles in the past year, and around six in ten of the largest blamed AI and automation. This is a fiscal problem too.

“In the Office for Budget Responsibility’s “technological displacement” scenario, technology such as AI lifts productivity for those who keep their jobs while others lose theirs. GDP is unchanged, but the gains flow to profits rather than wages. Because wages are taxed more heavily than profits, the same output yields less tax. AI inequality is a risk to the fiscal rules.

“Then there is price. Much of today’s AI is sold at promotional rates, subsidised by investors racing for market share, and the frenzy ends when investors want their promised returns. At that point, prices rise, the bubble bursts, or both.

“Whatever happens, the households, small firms and councils that have built AI into their routines at current prices will see this first and they are concentrated in the places least able to absorb a shock.

“So what would I like to see on 28 October? The Institute for Fiscal Studies warns that protecting public services and funding defence could take £35 billion in tax rises or benefit cuts. Most of what follows costs little and the rest is cheaper than the alternative.

1.      Measure what we are talking about. The Chancellor’s new economic potential analysis promises to judge places by what they could become. It should capture each place’s exposure to AI and the resilience of its firms and households – and the Treasury should publish a distributional analysis of AI by place and income. Milburn’s final report is now expected after the Budget, but ministers need not wait to test how far AI, alongside employment costs, is thinning the first step of the career ladder.

2.      Treat access to AI as public infrastructure and an equity issue. The fiscal devolution roadmap due at the Budget should give mayors the means to fund a basic AI entitlement for digitally excluded residents, with the support needed to use it. This should be new money, not repurposed, as before AI this problem was growing and AI makes the digital world more dangerous. Digitally excluded residents should not be thrown to the online wolves with a basic subscription and no support.

3.      Build resilience into all public AI procurement. That means stable multi-year pricing, the right to switch provider and open-source fallbacks if commercial prices jump. Every council should be able to stress-test its AI dependence against a price shock.

4.      Fund those on the front line properly. AI makes it far easier to write a complaint, an appeal or a claim, and most will be legitimate. Councils and schools have already highlighted that AI-drafted complaints are arriving longer with more legal terminology. Councils will need funding that keeps pace, so that the coming tsunami of complaints, appeals and claims are processed and citizens are not left upset by long bureaucratic delays.

5.      Attach conditions on job quality. Public money reaching AI firms, from Sovereign AI to the new northern scale-up fund, should favour technology that augments workers rather than simply replacing them. An ecosystem built on cost cutting is a regional liability, not an asset. Too much of what passes for AI innovation is a startup selling the same service for less by taking the labour out. That is cost cutting, not innovation. An economy that competes only on cost ends up with a smaller wage bill and a smaller tax base, whatever happens to output.

“On AI, the test will happen first in the places with the least room for error. Pragmatism about adoption and caution about bubbles are the right starting points. But Britain does not need to be the most AI-ready country. It needs to be the most AI-resilient one and this Budget is the moment to start.”

Will the Budget put working people first?

Dr David Beck, Lecturer in Social Policy, University of Salford, comments: “The UK Government has signalled that this autumn statement will focus on fiscal discipline, maintaining support for working people due to the sustained effects of the cost-of-living. All whilst providing stability for both businesses and households.

“But what does this mean in reality? Take the cost-of-living; leaning into his time as Mayor of Greater Manchester and the success of the Bee Network, Andy Burnham, has announced that there will be a £2 cap on bus fare nationally.

“Much of the early arguments presented by the new Prime Minister have highlighted 40-years of pain caused by Thatcherite neoliberalism, centring around the now evident problems of privatisation of key industries and the deregulation which followed. On this, Burnham himself, along with this autumn statement and the Budget to follow, has promised to deliver better for people trapped by the inequality caused by neoliberalism.

“For example, first-time buyers could be helped by a proposed interest free period on a government-backed equity loan scheme, providing 20% of the property value, as long as they can find a 2.5% deposit.

“The most striking planned move comes from the Labour party conference announcement of a new NHS-style national care service, although nothing concrete has yet been proposed. The upcoming Budget however, is expected to detail fully costed plans.

“What we can say is that this Budget, and the direction it signals for the future, is likely to be more left-leaning than its predecessors. On the surface, it’s likely to suggest a return to a more traditionally Labour, centre-left approach, with a stronger focus on people and workers – a position Starmer struggled to establish.

“Perhaps this is down to Burnham’s previous Westminster role in the late 1990s, but most likely something honed and developed during his time as Greater Manchester Mayor and having the levers of devolution.”

Devolution could make the energy transition feel real – and fair

Professor Vahid Vahidinasab, Chair in Sustainability, University of Salford, comments: “Today, most decisions about local electricity happen far from the places they affect. The Budget can change that.

“The devolution roadmap, due on 28 October, should give mayors and local leaders a funded role in planning local energy and a formal say alongside the network companies that run the wires.

“Take a school with solar panels on its roof. On a sunny August afternoon, the panels produce the most power when the building is empty and the spare electricity is sold to the grid for much less than the families across the road pay for theirs. With local coordination, that power could be used on the same street and the value would stay in the area.

“Flexibility follows the same logic. It means paying homes and businesses to shift when they use electricity, which is most valuable where the local network is under strain. Procuring it locally can delay costly network upgrades and help businesses connect to the grid more quickly. Great British Energy is already funding community projects and the new Great British Grid is intended to reduce connection delays. Both will achieve more if places have a stronger role in shaping how local power is produced, shared and used.

“Local control also allows communities to decide who benefits, ensuring that renters and households without solar panels or batteries share in the gains. Devolution will feel real to most people when it shows up on their energy bill.”