Britain's new chancellor, John Healey, used his first Budget on Wednesday to pair a one-off £100 energy payment for millions of households with a sharply higher tax on bank profits, as he tried to show voters some relief from a cost-of-living squeeze that the government's own forecasters say will leave households barely better off than before the pandemic.
Healey raised the surcharge on large banks' profits from 3% to 6%, a rate that will run from January through April 2028, and increased taxes on high-stakes gambling machines. The energy payment will go to households in council tax bands A to D in England, with Wales and Scotland saying they will match or replicate it. Gas standing charges will be scrapped during 2027, shifting those fixed daily fees onto the price of each unit of energy instead.
"Those are the storms we face. We can't wish them away. We must choose the course we steer through them," Healey told MPs, repeatedly invoking "global uncertainties" and oil prices pushed higher by the war between Iran and its adversaries.
A Growth Forecast Cut, Not Raised
The Office for Budget Responsibility downgraded its UK growth forecast for next year to just 1%, and its chair, David Miles, described the outlook for household finances as "pretty grim." The watchdog said Britain was set to spend an extra £14 billion on debt interest payments this year, leaving Healey little room for larger giveaways.
To help high street businesses, Healey raised the threshold at which shops in England start paying business rates from £12,000 to £18,000, excluding vape shops and adult gaming centres from the relief. He also extended a 5p "temporary" cut in fuel duty through July and confirmed the minimum wage will rise 3.9% in April, though he made no progress on narrowing the gap between pay rates for older and younger workers.
Opposition Calls It Too Timid
Conservative leader Kemi Badenoch said the plans were "not bold enough," arguing the government was "overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system." Healey confirmed that bigger decisions, including on defence spending and welfare reform, would be pushed into next year.
Income tax thresholds will stay frozen, and tax on savings and rental income will rise to 24% for basic-rate taxpayers from April 2027 — lower than the 22% increase scheduled by Healey's predecessor, Rachel Reeves, whose planned cut to the cash ISA allowance will now be scrapped entirely.
The budget's framing — a government reaching for bank-sector revenue to cushion households against externally driven energy costs — echoes a pattern playing out across several European economies this year, as the prolonged conflict in the Middle East keeps a floor under oil prices and complicates finance ministries' arithmetic well beyond Britain's borders.