The Guardian’s political editor, Pippa Crerar, and economics editor, Heather Stewart, examine John Healey’s first budget and how it will be received by voters.

Explainer Budget briefing: the key questions answered by Heather Stewart and Pippa Crerar Our economics and political editors dissect John Healey’s maiden budget The Guardian’s economics editor, Heather Stewart, and political editor, Pippa Crerar, assess the chancellor’s budget: what he said, why – and what he left out.

Did the chancellor’s budget panic the financial markets? Not at all. Reassuring febrile financial markets appeared to be one of Andy Burnham’s motivations in putting Healey in No 11, and this ‘steady-as-she-goes’ budget seems to have met that brief, for now.

The chancellor promised to keep Labour’s deficit-reduction plans on track, albeit at a slower pace in the early years of the forecast – raising taxes modestly to do so.

The Office for Budget Responsibility (OBR) now expects him to meet his crucial first fiscal rule – to balance day-to-day spending with revenues – with a margin of £15bn to spare. That’s a slimmer cushion than the £24bn Rachel Reeves had at the spring statement, but investors appear to have taken it in their stride, with barely a flutter in the bond markets. Healey stressed that he plans to rebuild his headroom back to £22bn by 2030-31. “That is what a buffer is for. Use it when you need it, rebuild it when you can,” he said.

However, the OBR’s forecasts underlined the significant hit to Britain’s public finances from higher borrowing costs – which it said had cost the government an additional £14bn in interest costs alone. Partly as a result, borrowing is set to be £8bn higher than expected this year, before heading back to target over time. And Healey has delayed a series of knotty decisions on tax and spend for a critical spending review next year.

Has Healey done enough to reassure restive Labour MPs and the public? Government insiders had briefed that the budget would be “low key”, with tough decisions over public spending – including on defence and welfare – put off to the spending review. But that didn’t stop Labour MPs asking “Is that it?” when Healey sat down from the dispatch box.

While they welcomed support for energy bills – the only rabbit in the budget – and other cost of living measures, they are impatient for Burnham to deliver the radical change he has argued the country needs. “That won’t end 40 years of neoliberalism, will it?” one MP remarked to the Guardian.

Healey’s decision to increase taxes on banks is likely to land well with the public – it is an industry which has made massive profits and does not elicit much sympathy from voters – but some Labour MPs are already questioning why he did not go much further to give himself more room for manoeuvre this winter.

For now, though, MPs aren’t kicking up a fuss. The polls – some of which put Labour eight points ahead – suggest the public is on board, and Burnham’s approval ratings remain high. He has won them a second hearing. Whether the public expected more than a signal of intent will become clear in the coming days.

But questions over the timing of the next general election have not gone away. After the budget, Burnham ruled out calling one in the next 12 months (he’d previously said there wouldn’t be one soon). Labour’s prospects at the ballot box remain very much on the mind of its MPs. And if there are suggestions the public is getting impatient, the pressure on Burnham will grow.

Has the budget really given consumers a “breathing space” amid the cost of living crisis?

Higher energy prices as a result of Donald Trump’s war in Iran have made the UK – an energy importer – poorer, as well as raising the cost of government borrowing. Healey’s key challenge was to decide who should have to bear the pain.

He announced a more generous package than expected to contain energy costs this winter, costing the Treasury about £4bn in total. That included sending £100 to every householder in council tax banks A to D; cancelling Rachel Reeves’s planned fuel duty rises; and extending the VAT cut on electricity bills until next summer.

But households will still be hit by a sharp rise in the energy price cap in January – which EDF predicts could be as much as 27%.

And because the cost of energy feeds into the cost of making almost everything, higher oil prices will push up economy-wide inflation, which the OBR now reckons will be 3.5% next year, instead of the 2% it expected in March. The Bank of England is expected to respond by pushing up interest rates, perhaps as soon as its meeting next week, causing fresh pain for mortgage-borrowers.

Despite the government’s interventions, the OBR reckons higher energy costs will make the outlook for living standards even worse than it previously feared. On its preferred measure, real household disposable income, living standards are expected to fall slightly this year as the impact of the war takes its toll – and then to climb gradually, to just 2% above pre-Covid levels by 2030. What does it tell us about the relationship between Healey and Burnham?

John Healey and Andy Burnham have had regular Sunday night curries in the No 11 flat in advance of the budget. While they are both of the soft left and agree the north is in need of investment, they haven’t fought in the political trenches together or shared a joint project, like Tony Blair and Gordon Brown.

Healey wasn’t even Burnham’s number one choice for the role. However, he was seen as capable and trustworthy and – crucially – more likely to sign up to the Burnham project than other figures touted for the role. Even so, there were early concerns that the chancellor could be “captured” by the Treasury, which still wields great power despite Burnham’s attempts to rebalance the government machine.

But the budget – a low key, defensive one which was small in scale and ambition – suggests the prime minister has had to accept the fiscal constraints to his ambition for more radical change. For now. Healey did, however, lay the groundwork for more significant reform in his boss’s priority areas: devolution and housing.

For his own part, he still has plenty to prove on defence spending – having quit Keir Starmer’s government over the failure to commit to 3% of GDP on defence by 2030. Healey signalled he will hit the target – but can’t say how until next autumn’s spending review. His own political reputation relies on it. What big decisions have been postponed by the breathing space budget?

Higher inflation will make it more expensive to deliver public services. Many Whitehall departments were already facing a tight spending squeeze towards the end of this parliament, on the plans Healey inherited from Reeves. The darker global backdrop is only likely to make that worse.

In its pre-budget analysis, the Institute for Fiscal Studies (IFS) suggested that, alongside the £11bn he would need to find to hit the 3% of GDP defence spending target by 2030, these additional pressures amounted to £35bn a year.

Healey gave little indication of how he intends to respond – though he did suggest that more digitisation of service delivery, and a significantly slimmed-down civil service at the centre as additional powers are devolved, would help to cut the government’s costs, and expressed the hope that better-than-expected economic growth might help.

“I believe Britain can beat the forecasts again,” he said. If not, next year’s spending review looks formidably challenging. Will people accept that the economic pressures aren’t the government’s fault?

Healey’s speech was littered with references to the difficult international picture, with Donald Trump continuing to wreak havoc on the global economy with his war in Iran. “Analysts like to speak of economic headwinds, but what we face today are global economic storms,” the chancellor told MPs.

The main risk identified by the OBR to its fiscal forecast is the evolution of the Middle East conflict and its implications for energy prices, interest rates and inflation. The US midterms are a key moment – and the big unknown is what the US president does next, which Downing Street is watching anxiously.

For now, however, the public appears willing to accept that the government is not to blame for resulting cost of living pressures. No 10 sources say their own research shows that most people still see the global context as a justifiable reason for their current plight, rather than an excuse. But government insiders are concerned this might change this winter, as soaring bills and costs really start to bite.