Chancellor John Healey has introduced his first budget, featuring a one-off £100 energy payment for millions of households and an increase in the tax on bank profits, aimed at providing immediate relief amid global economic instability. The measures are designed to offer "breathing space now" and "hope for the future" as the UK economy grapples with "global economic storms," Healey stated in a speech to the House of Commons.
Millions of households in council tax bands A to D in England will receive the £100 energy payment. Wales has pledged to match the payment, and the Scottish government plans to replicate it. Additionally, gas standing charges in England, Scotland, and Wales are set to be scrapped during 2027, with the costs shifted to the price of each unit of energy. The temporary 5p cut in fuel duty on petrol and diesel will be extended to July, and minimum wage rates will increase by 3.9% in April.
To fund these measures, Healey is increasing the tax on the profits of large banks from 3% to 6%, a measure that will be in place from January next year until April 2028. Taxes on high-stakes gambling machines will also be increased.
For businesses, the threshold at which High Street shops in England begin paying business rates will rise from £12,000 to £18,000, though vape shops and adult gaming centres are excluded from this relief. However, the budget offers limited scope for major spending increases due to strained public finances, with the UK anticipating an additional £14 billion in debt interest payments this year.
Income tax thresholds will remain frozen. The tax on income from savings and property rental will rise to 24% for basic rate taxpayers from April 2027, an increase from the previously scheduled 22%. A planned reduction in the cash ISA allowance, set to decrease from £20,000 to £12,000, has been canceled.
The Office for Budget Responsibility (OBR) has downgraded its growth forecast for the upcoming year to 1%, with slight increases projected for subsequent years. The OBR noted that British households may find themselves little better off than before the COVID-19 pandemic, even a decade after its onset.
Healey attributed the economic challenges to "global uncertainties" and rising oil prices stemming from conflict in the Middle East. He also announced plans to grant regional mayors 20% of business rates and a share of income tax for local spending, with the aim of allowing mayors to retain 100% of business rates in their areas by the end of the decade.
Regarding welfare and defense, Healey indicated that major decisions would be deferred until next year, pending the publication of reviews on youth unemployment and Personal Independence Payments. The £4.7 billion shortfall in the defense investment plan will be partially addressed by reallocating funds from capital budgets across Whitehall. The chancellor plans to outline the strategy for meeting defense spending commitments of 3% of national income by 2030 and 3.5% by 2035 during the next year's spending review.
Opposition parties have criticized the budget. Conservative leader Kemi Badenoch described the plans as "not bold enough," arguing that the government is "overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system." She also faulted Healey for not setting out a concrete defense spending plan immediately. Lib Dem leader Sir Ed Davey suggested that without addressing the UK's relationship with the EU, any budget would merely be "tinkering around the edges." Reform UK leader Nigel Farage commented that the budget offered "little giveaways" but failed to deliver significant value, particularly on defense.
Trade union leaders also voiced concerns. Sharon Graham, general secretary of the Unite union, called the cost of living measures "baby steps," arguing they would be insufficient given forecasts of rising energy bills. Green Party leader Zack Polanski criticized the budget for overlooking climate issues and repeatedly praising bankers.