Healey unveils £100 for energy bills and bank tax in first Budget

Energy support and bank tax headline first Budget

Ninoda.com – Millions of households are set to receive a one-off £100 payment towards energy costs under measures announced by Chancellor John Healey in his first Budget. The support will be financed partly through a higher levy on large banks’ profits, as the government responds to pressure on household budgets and a difficult economic outlook.

People in council tax bands A to D in England will qualify for the payment. Wales has said it will match the scheme, while the Scottish government intends to replicate it. The measure is aimed at offering immediate help as families contend with elevated energy costs and wider increases in day-to-day spending.

“Those are the storms we face. We can’t wish them away. We must choose the course we steer through them,”

Healey used his Commons statement to argue that conflict in the Middle East and higher oil prices were adding to the uncertainty facing the UK. He said the government wanted to provide “breathing space now” for families while building “hope for the future”.

Changes to energy bills and fuel duty

The Budget also includes plans to remove gas standing charges across England, Scotland and Wales during 2027, or as soon as possible afterwards. Standing charges are fixed daily costs paid by customers regardless of how much gas they use.

Those charges would instead be incorporated into the unit price of energy. That shift means households using large amounts of gas are likely to pay more, while the effect for lower-use customers will depend on their consumption. The policy is therefore intended to change the way bills are structured, rather than simply remove costs from the system.

Motorists will see the temporary 5p reduction in fuel duty continue until July. The cut applies to petrol and diesel and had originally been presented as a temporary intervention.

Minimum wage rates will rise by 3.9% in April. However, the government is not yet narrowing the difference between minimum wage rates for younger and older workers.

Taxes on banks, gambling and savings

Healey is increasing the tax on profits made by major banks from 3% to 6%. The higher rate is due to take effect in January next year and remain in place until April 2028. Taxes on high-stakes gambling machines will also rise.

At the same time, income tax thresholds will stay frozen. This can mean that people whose pay increases move into higher tax bands even if the thresholds themselves do not change.

Tax on income from savings and property rentals will increase to 24% for basic-rate taxpayers from April 2027. The rate had previously been expected to rise to 22%.

One previously announced change will not go ahead. A planned reduction in the annual cash ISA allowance, from £20,000 to £12,000, has been cancelled. The proposal had been announced last year by Healey’s predecessor, Rachel Reeves.

Help for high streets and more power for mayors

The Budget contains a package for businesses, including a higher starting point for business rates for high street shops in England. The threshold will move from £12,000 to £18,000. Vape shops and adult gaming centres will not receive the relief.

Healey also announced a devolution proposal under which regional mayors could retain 20% of business rates and receive a share of income tax revenues for spending on local priorities. The longer-term ambition is for mayors to keep all business rates generated in their areas by the end of the decade.

The chancellor described the approach as “the most radical act of devolution in a generation”. The proposal would give mayors a greater direct financial stake in economic growth within their regions, while leaving further detail about how the arrangement would operate to be set out.

Growth outlook and constrained public finances

Despite the range of smaller measures, Healey had limited room for major spending announcements. Debt interest costs are expected to be £14bn higher this year, placing further strain on public finances.

The Office for Budget Responsibility has reduced its forecast for UK growth next year to 1%, although it expects slightly stronger growth in the following years. Its latest assessment also indicated that households could be only marginally better off than before the Covid pandemic even ten years after the crisis began.

David Miles, who leads the watchdog, described that prospect as “pretty grim”. The assessment underlines the challenge for ministers trying to improve living standards while managing borrowing, taxation and demands for public spending.

Welfare and defence decisions delayed

Several significant choices have been deferred until next year. Healey said the government would not decide on welfare reforms until reviews led by Alan Milburn and Stephen Timms are complete. Milburn is examining young people who are neither working nor in training, while Timms is reviewing Personal Independence Payments.

Legislation is expected to follow next year. Healey said he and Prime Minister Andy Burnham remained committed to reducing welfare spending, but would do so in what he called a “Labour way”.

The Budget also addressed a £4.7bn gap in the defence investment plan. Funding will come in part from capital budgets across Whitehall, while Healey said further detail would be provided on how the government intends to meet its commitment to spend 3% of national income on defence.

Conservative leader Kemi Badenoch criticised the package, saying it was insufficiently ambitious. She argued that the government was “overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system”.

For households, the immediate practical changes are the £100 energy payment, the extended fuel-duty reduction and the planned minimum wage increase. The broader Budget picture is more cautious: support is being paired with higher taxes in some areas, and many of the most consequential choices on welfare, defence and long-term public spending remain to come.