Budget 2026: Healey Announces Energy Bill Support, Pension Rise and Defence Funding in First Budget Under Burnham

Chancellor John Healey has set out the government's tax and spending plans in his Budget, the first since Andy Burnham became prime minister. The package covers energy costs, pensions, housing, defence and a range of business tax changes. On energy, up to 20 million households in council tax bands A to D in England will receive a one-off £100 payment to help with rising bills, with equivalent funding for Scotland, Wales and Northern Ireland. Standing charges, the fixed daily fees customers pay regardless of usage, will be removed from household gas bills in England, Scotland and Wales, with the costs added to the unit rate instead. The VAT cut on electricity bills has been extended to July, and the Gas Shipper Obligation, a green levy funding hydrogen projects, will be moved from energy bills to general taxation. The fuel duty freeze has also been extended again to July. Drivers and businesses received further measures. Import taxes will be removed on more than 100 food products, including gherkins and marmalade, as well as on kerosene and fertilisers. The 55p per mile tax-free mileage rate for those driving up to 10,000 miles for work becomes permanent, with the rate above that distance rising from 25p to 35p per mile. A new scheme cutting electricity bills by 25% for 10,000 energy-intensive businesses launches in April, with payments backdated for energy costs this year. Several tax changes take effect from April. Landlords will face a further 2% in income tax on rental profits from April 2027, and an extra 2% tax applies to income from savings and property rental from April. The tax-free cash ISA allowance remains at £20,000 a year, with plans to lower the limit to £12,000 for under-65s scrapped. The surcharge banks pay on their profits rises from 3% to 6% for 15 months starting in January. Taxes on gambling machines with stakes over £1 rise from 20% to 25%, and online marketplaces such as Amazon, eBay and Temu will be made responsible for collecting VAT owed by sellers using their platforms. For pensioners and workers, the new flat-rate state pension rises by £488 a year from April, equivalent to 3.9%, under the triple lock policy, while the old basic state pension rises by £374.40. A new tax-free allowance for low-income pensioners will ensure those with income up to the value of the full new state pension do not pay income tax. The legal minimum wage rises by 3.9% in April. Unpaid carers will no longer lose their entire Carer's Allowance if they earn more than £204 a week after tax, with a taper rate introduced instead, and parental pay is extended to self-employed fathers and parents in same-sex couples. Housing measures include a new scheme to help first-time buyers in England, offering government-backed loans to households earning less than £110,000, or £140,000 inside London. A First Time Buyer ISA will be introduced from April 2029 to replace the Lifetime ISA. Lifetime ISA holders buying a property above the £450,000 cap will pay a reduced withdrawal charge of 20%, down from 25%. An extra £1bn for social and affordable housing in England takes total funding for the 10-year programme to more than £40bn, while a further £432m has been added to the initiative to end rough sleeping by Christmas. Devolved and regional funding was also announced. All business rates will be retained locally by the end of the decade, with mayors keeping 20% of revenue from next year and receiving a share of income tax receipts from 2028. Regional bodies and mayors in England will gain greater powers over spending, starting with £285m next year for housing, transport and high streets, alongside a £1.5bn borrowing facility to be designed with mayors for larger projects. The threshold at which high street shops start paying business rates in England rises from £12,000 to £18,000, though adult games centres and vape shops will no longer qualify for certain business rates relief. On defence and international policy, the chancellor promised an uplift in defence spending by 2030. The Defence Investment Plan will be fully funded through a further 1% cut to the capital budgets of other government departments, after Sir Keir Starmer committed only £10.3bn towards the £15bn plan. Details of how the government will meet a Nato commitment to spend 3.5% of GDP on defence by 2035 will be set out at next year's Spending Review, with a target of 3% in 2030. The government also announced an extra £10bn of economic and military support for Ukraine. Other spending includes more than £600m for artificial intelligence projects, including an extra £120m for the UK's AI Security Institute and £100m for a national AI Biosecurity Lab, a £7m fund to explore a possible future bid to host the Olympics and Paralympics in northern England, and £15m for a fund to tackle misogyny in schools, at work and in communities. The Office for Budget Responsibility predicts the economy will grow by 1.2% this year, up from a previous estimate of 1.1%, slowing to 1% next year before lifting back to 1.6% in 2028. Inflation is forecast to average 3.1% this year and 3.4% in 2027 before falling to the government's 2% target in 2028. Borrowing is predicted to be higher than previously expected in every year of the forecast, though as a proportion of GDP it is forecast to fall from 4.2% this year to 1.8% in 2030/31, while national debt is set to rise from 96% of GDP this year to 97% in 2028/29 before falling back to 96% in 2031.