British Chancellor of the Exchequer John Healey announced a £100 payment for households in council tax bands A to D, which will assist 20 million households. The measure will, according to him, cost the state £2.6 billion.
Healey also announced an increase in the bank levy, doubling the additional tax on their profits from the current 3 per cent to 6 per cent for a period of 15 months starting in January. The increase is, however, less than the 8 per cent expected by industry representatives. Despite this, bank share prices rose following the announcement, with NatWest and Standard Chartered recording gains of more than 4 per cent.
The Chancellor announced an unexpected increase in income tax of 2 percentage points for landlords and savers. He highlighted that higher inflation resulting from the war in Iran will cost the state an additional £14 billion in interest. The Office for Budget Responsibility (OBR) cut its growth forecast for next year to 1 per cent, from 1.6 per cent as expected in the spring.
Healey pledged to meet the first Labour fiscal rule of balancing current spending with tax revenues by 2029/2030, with fiscal headroom of £15 billion, compared with £24 billion set out by Rachel Reeves in March. This buffer, he said, should be rebuilt to £22 billion by 2030/2031.
He also announced raising the threshold for the small profits rate from £12,000 to £18,000 for companies in the retail, hospitality and leisure sectors, which will be funded by higher taxes on casinos and e-cigarette shops. He also announced cheaper borrowing for local authorities to tackle homelessness, a VAT relief on the sale of land to social housing providers, and confirmed a new My First Home mortgage scheme for first-time buyers.
Healey extended the VAT reduction on electricity bills until July next year and scrapped the fuel duty increases outlined by Rachel Reeves. He also announced funding to tackle rough sleeping and a 'new deal for data centres'. He described his budget as a 'budget built on fiscal discipline, which combines immediate measures with a clear direction for the future'.
Martin Lewis stated that the Chancellor told him during a meeting this morning that, after removing fixed charges from gas bills, he wants to remove them from electricity bills as well. The Chancellor will, according to Lewis, discuss with Ofgem how to remove this charge, but it is 'more complex' and will take longer.
Kemi Badenoch described the budget as minimal and inadequate, asserting that it does not 'come close to answering the moment'. She criticised Healey for refusing to cut social benefits to fund higher defence spending. She said that next year, under Labour, the tax burden will be the highest in the country's history, that the bill for social benefits is rising by tens of billions of pounds, and that a quarter of all working-age adults receive some form of support. She said she would reject Healey's call to support the 3 per cent increase in the bank levy.
The Office for Budget Responsibility forecasts that there will be no growth in real wages in the United Kingdom in 2027. It expects real pay growth to recover to around 0.5 per cent annually by 2030, as energy prices fall. The Office also cut its forecast for growth in real household disposable income per person. The probability of meeting the fiscal mandate has fallen to 56 per cent, compared with 59 per cent in the 2025 budget, and the fiscal mandate margin stands at £15 billion, which is £7 billion less than at the last formal assessment of the fiscal rules.
