By Salma El-Sakka
Chancellor John Healey unveiled a £100 energy payment for 20 million households in England as the centrepiece of his first budget, aiming to cushion families from what he called "global economic storms" driven by Middle East conflict and rising energy costs. The payment will go to homes in council tax bands A to D, covering properties worth up to about £600,000 in London, with equivalent funding provided for Scotland and Wales.
Energy payment and funding
The £2.6bn giveaway will be financed by a windfall tax on banks, with the banking surcharge doubled to 6% from 3% for 15 months from January. Healey also extended the VAT cut on electricity bills until July 2027 and cancelled planned fuel duty increases. The chancellor said the measures would give households "a bit of breathing space" while acknowledging the outlook for living standards had been downgraded.
Tax changes and business measures
Income tax thresholds remain frozen, a move projected to drag an extra 6.7 million people into paying income tax and push 5.4 million more into the higher rate band by 2031-32. Landlords and savers face an unexpected two percentage-point income tax rise. For businesses, the rates relief threshold for retail, hospitality and leisure firms will rise from £12,000 to £18,000, funded by higher taxes on gambling and vape shops.
Economic outlook and fiscal rules
The Office for Budget Responsibility cut its growth forecast for next year to 1% from 1.6% in the spring, citing higher inflation from the Iran war that could add £14bn to government interest costs. Healey pledged to meet Labour's first fiscal rule — balancing current spending with tax receipts by 2029-30 — but with reduced headroom of £15bn, down from £24bn in March. The minimum wage will increase 3.9% to £13.21 an hour, while pensions rise under the triple lock with new tax relief to prevent pensioners paying income tax as the state pension exceeds the personal allowance.
Devolution and social policies
Healey announced sweeping new powers for regions, promising all mayors a share of income tax revenue from 2028 and a goal for local government to retain 100% of business rates income before the decade ends. A package targeting homelessness was also included, though the chancellor resisted calls to ease fiscal drag on household incomes.
