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Weaker forecasts will have ‘consequences’ at Budget, warns minister
A Cabinet minister has warned there will be “consequences” from recent weaker economic forecasts at this month’s Budget as he declined to repeat Labour’s promises on tax.
Defence Secretary John Healey insisted no decisions had been made on the final shape of the Budget, due to be delivered by Rachel Reeves on November 26.
But he added that the Office for Budget Responsibility (OBR) now saw much worse “scarring” on the economy than previously thought and the Chancellor would make “announcements to deal with those challenges”.
And asked whether the Government would stick to its manifesto pledge not to raise income tax, national insurance or VAT, Mr Healey declined to repeat the promise.
He told Sky News’s Sunday Morning With Trevor Phillips programme: “That’s for the Budget and that’s for the Chancellor to announce at the end of the month.”
Pressed further on Labour’s tax commitment, he added: “No decisions have been taken about the Budget, even the Office of Budget Responsibility hasn’t produced its final figures.
“But what we do know is that they now see the deep damage and scarring to be much more serious than previously thought, a combination of years of cuts, Covid and really slow economic growth over 14 years.
“So there are consequences. Things do change, and we’ll have the announcements that are needed to deal with those challenges in the Budget.”
But he insisted that Ms Reeves’s announcement would stick to her “fiscal rules”, take steps towards easing cost of living pressures, and “drive stronger economic growth”.
His comments follow a week in which the Prime Minister himself failed to repeat Labour’s pledge amid speculation that Ms Reeves is planning to increase income tax.
The OBR is widely expected to downgrade its productivity forecasts for the UK at the end of the month, adding as much as £20 billion to the Chancellor’s costs if she is to meet her fiscal rules.
That comes on top of an already significant gap in her spending plans caused by higher borrowing costs, persistent inflation and spending commitments such as partially reversing cuts to winter fuel allowance and the U-turn on slashing the benefits bill.
The figure could end up even higher if she implements policies such as ending the two-child benefit cap and continuing the freeze on fuel duty.
Having pledged there will be “no return to austerity” in the form of deeper spending cuts, Ms Reeves is expected to increase taxes again at the Budget.
Economists have suggested that increasing income tax would be the most effective way to raise the money she needs, with the alternative solution of increasing many smaller taxes likely to do “unnecessary economic damage”.
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The BSE Sensex is trading higher by 371 points, or 0.47%, at 81,090.24, while the NSE Nifty rises by 70 points to trade above 24,850 at 24,889.25.
Stock Market Today.
Market Updates Today: A day after the market crash following the Budget’s provision to hike Securities Transaction Tax (STT), the domestic equity market on Monday saw heightened volatility. After opening nearly flat, the NSE Nifty rose to the day’s high, then touched the day’s low before sharply recovering to trade at the day’s high of 25,093.
As of 3:16 pm, the BSE Sensex surged by 932 points, or up 1.13%, to 81,641.87 in the afternoon trade and the NSE Nifty rose by 267 points, or up 1.07%, to trade above 25,000 at 25,093.27. After opening nearly flat, the NSE Nifty rose to the day’s high, then touched the day’s low before sharply recovering to trade at the day’s high of 25,093.27.
Among the 30 Sensex shares, 25 stocks were trading in the green. Among the top gainers were PowerGrid, Adani Ports, BEL, Reliance, Mahindra & Mahindra, Larsen & Toubro, and IndiGo, rising by up to 7.91%. The laggards were Axis Bank, Infosys, Titan, TCS, and Trent, falling by up to 1.97%.
After opening nearly flat, at around 9:30 am, the BSE Sensex jumped by 350 points to 81,112.03 in the opening trade, while the NSE Nifty rose 91 points to trade above the 24,900 level at 24,910.85. However, the benchmarks gave up all gains and declined to day’s low amid heavy volatility.
Aakash Shah, technical research analyst at Choice Equity Broking Private Ltd, said, “Near-term sentiment remains cautious despite some support from domestic technical indicators. The broader market direction will largely be influenced by global equity cues, crude oil price movements, and institutional fund flows.”
On Sunday, the Nifty saw an aggressive sell-off after the Budget 2026 announcement to hike STT, plunging nearly 870 points from 25,440 to an intraday low of 24,571, before staging a partial recovery to close at 24,825.
“A strong bearish candle was formed, with the index closing decisively below the 200-day EMA, indicating a deterioration in trend strength. Immediate resistance is placed at 24,950–25,000, while key support lies in the 24,650-24,700 zone. The RSI slipped to 31, reflecting oversold conditions, while India VIX surged 10.73% to 15.09, highlighting elevated market volatility,” Shah said.
On Sunday, February 1, foreign institutional investors (FIIs) sold equities worth Rs 588 crore, while domestic institutional investors (DIIs) also remained net sellers, offloading shares worth Rs 682 crore, adding to the pressure on the market.
V K Vijayakumar, chief investment strategist at Geojit Investments Ltd, said, “Yesterday’s market selloff resulting in 495 point crash in Nifty was a knee-jerk reaction to the sharp increase in STT on F&O trades. This was not a revenue-raising measure, but a decision to discourage retail traders from complex F&O trading, in which 92% of them were losing money. This decision is in the interest of retail investors. But this decision impacted the market sentiments, which were already impacted by the decision to make no changes in the LTCGs tax, which a section of the market was expecting rather unrealistically.”
It is important to understand that the Budget is a growth-oriented Budget with fiscal prudence. The 10% nominal GDP growth projected in the Budget is achievable and has the potential to deliver around 15% earnings growth in FY27. The market will soon start discounting this positive. But it is possible that FIIs may continue to sell impacting the market. Retail investors should keep their cool and remain invested and continue to invest systematically. A significant upturn in the market may take time; perhaps a retreat from AI trade globally. We don’t know when this will happen. But we know that an earnings rebound is imminent in response to this growth oriented Budget. That is a clear positive, he added.
February 02, 2026, 09:34 IST
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