Chancellor Healey's First Budget: £100 Energy Payments, Bank Tax Doubled

By Olivia Hart

Chancellor John Healey has put a one-off £100 energy payment for millions of English households at the centre of his first Budget, paid for by doubling the tax on big banks' profits from 3% to 6%. The bank levy will run from January next year to April 2028. That is roughly £2 a week for eligible households — real money for strained budgets, but a rounding error against forecasts of far larger bill increases.

The £100 payment goes to households in council tax bands A to D in England. Wales will match it, and the Scottish government plans to "replicate" it. Healey told a packed House of Commons he wanted to give families "breathing space now" and "hope for the future" amid what he called "global economic storms".

What does the Budget change for households?

The household measures come in four parts:

• A one-off £100 energy payment for council tax bands A to D in England, matched in Wales and replicated in Scotland
• Gas standing charges in England, Scotland and Wales scrapped during 2027 "or as soon as possible after" — but the fixed daily fees shift onto unit prices, so heavy gas users will pay more
• The 5p "temporary" fuel duty cut on petrol and diesel extended to July
• Minimum wage rates up 3.9% in April, with no narrowing of the gap between older and younger workers' rates

Healey framed the UK economy as battered by "global uncertainties" and Middle East conflict driving oil prices higher. "Those are the storms we face. We can't wish them away. We must choose the course we steer through them," he told MPs.

How tight was the fiscal room?

Very. The UK will spend £14bn more on debt interest payments this year, and the Office for Budget Responsibility downgraded its growth forecast for next year to 1%, with slightly higher increases predicted after that. The OBR's assessment, in the words of its chief David Miles, is "pretty grim": British households will be little better off than before the pandemic even a decade after Covid-19 hit.

Income tax thresholds stay frozen. The tax on savings and rental income will rise to 24% for basic rate taxpayers from April 2027 — up from a scheduled 22%. One reversal did land: the cut to the cash ISA allowance from £20,000 to £12,000 a year, announced by Healey's predecessor Rachel Reeves, will be axed.

What was announced for business and devolution?

The business rates threshold for High Street shops in England rises from £12,000 to £18,000 — vape shops and adult gaming centres excluded. Healey also said regional mayors will keep 20% of business rates and a share of income tax for local priorities, aiming for 100% retention by the end of the decade in "the most radical act of devolution in a generation". Ambitious language; the delivery date sits safely beyond this parliament.

What was postponed?

Defence and welfare decisions slip to next year. Healey said the £4.7bn black hole in the defence investment plan will be funded partly by raiding capital budgets across Whitehall, with the path to 3% of national income on defence by 2030 — and 3.5% by 2035 — set out at next year's spending review. Welfare reform awaits reviews by Alan Milburn on young people not in work or training and Stephen Timms on Personal Independence Payments, with legislation to follow next year.

How did critics respond?

Conservative leader Kemi Badenoch called the plans "not bold enough" and the government "overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system". She said Healey "should have set out a plan for 3% today", invoking his June resignation as defence secretary: "This is on him and no-one will ever forget. If he had any decency he would resign again today."

Helen Miller of the Institute for Fiscal Studies said the Budget "has a raft of fiddly measures but very little that will move the dial on growth". Lib Dem leader Sir Ed Davey said that without fixing the EU trading relationship, any Budget is "tinkering around the edges". Nigel Farage dismissed "little giveaways" with "anything of any value on defence whatsoever" absent. From the left, Unite's Sharon Graham called the cost-of-living measures "baby steps" that "will not touch the sides, when many forecasts show bills set to jump over £400 in January". Green leader Zack Polanski said Healey "didn't mention climate once but praised bankers repeatedly".

The arithmetic is the story: £100 against a forecast £400 January jump, and a growth forecast cut on the same day the cheques were promised.