Healey's First Budget Gives 20 Million Households 100 Pounds for Energy Bills

John Healey has delivered his first Budget, and the morning-after argument is already about whether 100 pounds is enough. Up to 20 million households in council tax bands A to D in England will get a one-off energy payment this winter. Wales has said it will match it. The Scottish government plans to replicate it. The bill is to be met, in large part, by a higher tax on bank profits.

In an hour-long speech on Wednesday, with Prime Minister Andy Burnham and the front bench behind him, the Chancellor said he wanted families to have "breathing space now" and "hope for the future" while the economy is hit by what he called global economic storms. Oil prices, pushed up by the war in Iran, sat behind almost every line. "Those are the storms we face. We can't wish them away. We must choose the course we steer through them," he told MPs.

What the 100 pound energy payment covers

The payment is the centrepiece, and it is blunt. Eligibility follows the council tax band, which still rests on property valuations from the early 1990s. Gas standing charges in England, Scotland and Wales are to be scrapped during 2027, "or as soon as possible after". Those fixed daily fees move onto the price of each unit, so households that burn a lot of gas will pay more, and households that burn little should pay less.

The 5p cut in fuel duty on petrol and diesel, trailed before the speech, is extended to July. The National Living Wage and associated minimum rates rise by 3.9 per cent in April. There is no move to close the gap between the rates for older and younger workers. On the high street, shops in England start paying business rates at 18,000 pounds of rateable value rather than 12,000. Vape shops and adult gaming centres are excluded from that relief. Burnham said on Thursday that the change would lift 70,000 businesses out of business rates altogether.

How the bank tax and the other rises pay for it

The surcharge on the profits of the big banks goes from 3 per cent to 6 per cent, starting in January and running to April 2028. That is a real rise, and it is the one the Treasury can point to when it says the energy help is paid for. It is also short of the 8 per cent rate the City lobby had warned would knock output. Taxes on high-stakes gambling machines go up as well. Read the City's morning-after verdict if you want the market reaction, and the warning UK Finance sent before the rate was set.

Income tax thresholds stay frozen. Tax on income from savings and from property rises to 24 per cent for basic-rate taxpayers from April 2027. It had been due to rise only to 22 per cent. A cut in the cash ISA allowance, from 20,000 pounds a year to 12,000, announced under Rachel Reeves, is abandoned. The public finances did not give Healey room for a larger giveaway: debt interest this year is 14 billion pounds higher than planned.

Mayors are offered a different kind of prize. They will be able to keep 20 per cent of business rates, and a share of income tax, for local priorities, with a stated aim of retaining all local business rates by the end of the decade. Healey called it the most radical act of devolution in a generation. The borrowing powers trailed earlier in the week are set out in our pre-Budget note.

What the OBR and the Resolution Foundation said

The Office for Budget Responsibility cut its growth forecast for next year to 1 per cent. David Miles, of the watchdog, described the longer picture for household living standards as "pretty grim": a decade after Covid, families are set to be little better off than they were before the pandemic. Fiscal headroom against the main rule, a current budget balance by 2029-30, is 15 billion pounds, down from the 24 billion pounds Reeves had in the spring. Healey says the buffer will be rebuilt to 22 billion pounds by the end of the forecast.

On Thursday the Resolution Foundation went further. Chief executive Ruth Curtice called it a scattergun Budget that did little to address the sharp challenges facing Britain. On the foundation's numbers, the cost-of-living subsidies give the poorest half of households 158 pounds on average this year and next, and the richest half 144 pounds. The gap is 14 pounds. Curtice called that "a complete failure to target help at those who need it most". The foundation expects typical disposable incomes to fall by 1,050 pounds by 2028-29, which would limit the gain over the whole parliament to about 600 pounds.

That was Ruth Curtice. She said even families who receive the help will face higher energy bills than during the last price shock.

Helen Miller, director of the Institute for Fiscal Studies, said the statement had "a raft of fiddly measures but very little that will move the dial on growth". Sharon Graham, general secretary of Unite, called the cost-of-living measures "baby steps" and said they would not touch the sides if bills jump by more than 400 pounds in January, as some forecasts suggest.

The political row, from Badenoch to the welfare line

Kemi Badenoch said the plans were not bold enough, and that the government was "overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system". She argued Britain is heading for a record tax burden and already spends more on debt interest than on the army and schools combined. On defence she was personal. A 4.7 billion pound hole in the defence investment plan will be filled in part by taking money from capital budgets across Whitehall. The route to spending 3 per cent of national income on defence by 2030, and 3.5 per cent by 2035, is left for next year's spending review. Badenoch said Healey, who resigned as defence secretary in June warning that the forces were short of cash, had failed his own test. "If he had any decency he would resign again today."

Welfare was the other open flank. In the Budget, Healey said he and Burnham wanted to bring the benefits bill down "in a Labour way", but that no decisions would be taken until Alan Milburn's review of young people out of work or training, and Stephen Timms's review of personal independence payments, are published. Legislation would follow next year. On Thursday morning he told the BBC there would be "a reduction in the benefits bill". The Treasury later said those remarks had been misinterpreted, and it would not commit to a cut before the next election.

Sir Ed Davey said that until ministers have the courage to repair Britain's trading relationship with the European Union, a Budget can only tinker. Nigel Farage said there were "little giveaways" and nothing of value on defence. He was not in the chamber. He said a green slip reserving his seat had been removed, and that he stayed away because he feared a physical altercation with another MP. Reform has not named that MP. Zack Polanski, for the Greens, said the Chancellor did not mention climate once and praised bankers repeatedly.

Burnham's defence, given to broadcasters on Thursday, was that helping 20 million households with energy this winter is "pretty bold", and that taking 70,000 businesses out of business rates will lift high streets. Tuesday's smaller package, on mileage, carers, marmalade and the Post Office, still stands. Those everyday fixes were never going to be the Budget. This was. The argument on Thursday is whether it buys breathing space, or only a receipt.