John Healey is announcing his financial update – here are the main points, with political analysis
John Healey starts by saying that his budget is “delivered at a time when global uncertainties and pressures are swirling worldwide and hitting people here at home”.
Healey says he will meet the fiscal rule that day-to-day spending must be covered by tax receipts, and the investment rule that government debt, defined as public sector net financial liabilities, must be falling as a percentage of GDP in the third year of the forecast.
The government will have £15bn of headroom in 2029-30 and £20bn in 2030-31, according to the Office for Budget Responsibility, the government’s forecaster.
Government borrowing will be 4.2% of GDP this year, 3.4% next year, then 2.9%, 2.1% and 1.8% by 2030-31, the OBR says.
Predictions of slowing growth were wrong, Healey says. The OBR says GDP will grow by 1.2% this year, 1% next year, 1.6% in 2028, 1.8% in 2029, 1.7% in 2030 and 1.6% in 2031. In March the OBR had predicted GDP growth of 1.1% in 2026, rising to 1.6% in 2027 and 2028, and dropping to 1.5% in 2029 and 2030.
Government debt is forecast to be 83.2% of GDP this year, 83.8% next year then falling to 83.1%, 82.3% and 81.7% in the following years.
Labour’s priority is cheaper energy, Healey says. He announces a series of measures to try to cut bills, including scrapping a levy on bills to fund hydrogen to lower bills and moving older renewables onto fixed-price contracts.
Healey says the government will extend a VAT cut through the winter and spring to July, taking £50 pounds off the annual price cap.
He confirms the government is abolishing standing charges on gas bills for 23m homes in a move it says will save two-thirds of households an average of £45 a year.
He says 20m households in council tax bands A to D will receive a £100 energy payment paid directly into bank accounts. It will cost £2.6bn, he says.
Fuel duty will be frozen for the 16th year in a row. Every government forecast over that time has pretended it will then rise in future years to raise more cash, only for the freeze to continue.
Healey increases the higher mileage rate for people who use their cars for work from £0.25 to £0.30 a mile.
Healey says he will remove import tariffs on more than 100 products, including baked beans, chocolate and gherkins, to reduce their shop prices as trailed before the budget.
On paternity leave, self-employed fathers will be eligible for paternity leave pay for the first time.
Healey says he will increase the threshold for small business rate relief from £12,000 to £18,000, giving a tax break to 70,000 smaller firms.
On gambling, machine game duty will rise from 20% to 25% for higher stakes machines.
Adult gaming centres and vape shops will not qualify for business rates relief.
Online marketplace sellers will be targeted to ensure they are unable get around VAT.
Healey says there will be new funding from HMRC to improve compliance and stronger powers to collect overdue tax from those who “can clearly afford to pay but ignore repeated contact”.
There will be no change on tax on income from dividends, and no change on tax to income from employment.
Healey confirms he will reverse his predecessor’s decision to cut the tax-free allowance on cash individual savings accounts (ISAs) from £20,000 to £12,000 a year from April.
Healey says he celebrates the role that banks play in the UK economy, but they will pay an extra 3% on the bank surcharge for 15 months from January. In a budget characterised by relative secrecy, raising taxes on banks was one of the policies that did leak out beforehand.
PW: No big surprises here, with the bulk of the changes being technical or incremental. The one exception is the expected increase in the windfall tax on bank profits, which will be set aside to pay for measures to help with energy bills. With this comes a direct challenge from Healey to Kemi Badenoch, who speaks next: does she back this or not?
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