What do households want from the UK Budget?

  British households favor public spending cuts over tax hikes to mend the nation’s public finances ahead of Chancellor Healey’s inaugural budget, according to a survey by Deutsche Bank. 

The survey comes as the government prepares for its first major fiscal event on Oct. 28. Deutsche Bank noted that while a handful of discretionary measures have been introduced to ease cost-of-living pressures, the autumn fiscal event may be relatively modest, with larger policy shifts expected next year. Only 14% of respondents supported tax increases as the primary method to improve public finances, compared with 26% who favored reducing public spending. Support for spending cuts was highest among respondents aged 55 and older and households earning over 50,000 pounds ($66,000) annually.

When asked which taxes should be raised if tax hikes become necessary, households overwhelmingly pointed to business profits and wealth:

• Corporation Tax: 32% of respondents backed corporate tax increases as the primary source of revenue.

• Capital Gains Tax: 16% selected capital gains tax reforms.

• Property and Income Taxes: Property taxes gathered 9% support, while broad income tax increases were favored by 8%.   

On public spending reductions, 52% of respondents called for cuts to foreign aid, directly conflicting with media reports suggesting the government intends to increase overseas aid to 0.7% of Gross National Income. Other targeted areas included reducing the size of the civil service (36%), shaving welfare spending (33%), and trimming culture, media, and sports budgets (23%).

Despite heightened global political risks, 13% of households identified defense spending as a potential target for reductions.

Interest rate expectations

The bank’s primary research showed solid backing for Prime Minister Burnham’s regional devolution agenda. A net balance of 21% of respondents (+21%) supported moving more decision-making power out of London, with enthusiasm highest among younger demographics (45%) and lower- and higher-income brackets.

Additionally, a net 10% of households expect mortgage rates to decline over the next six months under the current administration, led by strong optimism among younger adults (+31% net balance) and high earners (+32% net balance).

Deutsche Bank projects UK economic growth to slow to 1.1% in 2026, down from 1.3% in 2025, while year-end inflation is expected to reach 3.3%. The bank projects the Bank of England’s benchmark rate to remain at 3.75% through the end of 2026 before easing to 3.25% in 2027.