Iran-US war latest: Tehran attacks ships in Strait of Hormuz after US strikes Iranian oil tankers

The Chancellor has warned that the Budget in the autumn could be tough, as US President Donald Trump’s war in the Middle East affects the British economy. John Healey issued the warning amid the leap in Government borrowing earlier this week, reflecting concerns among lenders about the inflationary impact of the US’s war with Iran. Mr Healey also told the Financial Times he would ensure the UK emerges from his first Budget on 28 October with a solid “buffer against uncertainty”.

Economists have predicted that the fiscal buffer Rachel Reeves built up in her last budget, through a combination of tax rises and departmental spending cuts, will be squeezed by the inflationary pressures of ongoing global turmoil. This could limit prime minister Andy Burnham’s ambitions to tackle the cost-of-living crisis, and spending plans across his wider agenda for Government. The chancellor told the FT: “What’s happening in the Middle East is hitting inflation, it’s hitting growth, it’s hitting borrowing costs.”

He added: “It’s part of a more dangerous world that is more uncertain and it’s one of the challenges we have to meet in this country, but have to meet with other [countries].”