Chancellor Healey Unveils Budget with Energy Bill Relief, Tax Changes and Housing Support

Chancellor John Healey has set out the government's tax and spending plans in his Budget, the first since Andy Burnham became prime minister. On energy costs, up to 20 million households in council tax bands A to D in England will receive a one-off £100 payment to help deal with rising bills, with equivalent funding provided 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 will be extended to July, and the Gas Shipper Obligation, a green levy funding hydrogen projects, will be moved from energy bills to general taxation. Several tax changes were announced. From April, an extra 2% tax will apply to income from savings and property rental, and from April 2027 landlords will face a further 2% in income tax on rental profits. The amount people can put into tax-free cash Isas will remain 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 will rise from 3% to 6% for 15 months starting in January. Fuel duty will be frozen again to July, import taxes will be removed on more than 100 food products as well as kerosene and fertilisers, and the 55p per mile tax-free mileage rate for those driving up to 10,000 miles for work will be made permanent, with the rate above that distance rising from 25p to 35p per mile. Businesses will see the threshold at which High Street shops start paying business rates in England increase from £12,000 to £18,000, meaning no rates will be paid on properties with a rateable value below that level. A new scheme taking 25% off electricity bills for 10,000 energy-intensive businesses will launch in April, with payments backdated for energy costs this year. Adult games centres and vape shops will no longer qualify for certain business rates relief, taxes on gambling machines with stakes over £1 will 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. Households will also see changes to pay and benefits. The legal minimum wage will rise by 3.9% in April. The new flat-rate state pension will increase by £488 a year from April, equivalent to 3.9%, under the triple lock policy, while the old basic state pension will rise 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 will not pay income tax. 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 will be extended to self-employed fathers and parents in same-sex couples. On housing, a new scheme will help first-time buyers in England purchase a home, 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, and 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 has been allocated for social and affordable housing in England, taking total funding for the 10-year programme to more than £40bn. Regional devolution features prominently, with all business rates to be retained locally by the end of the decade and mayors keeping 20% of revenue from next year. Mayors will receive a share of income tax receipts from 2028, regional bodies will get greater powers over spending starting with £285m next year, and the government will work with mayors to design a £1.5bn borrowing facility for larger projects. A further £432m has been added to the initiative to end rough sleeping in England by Christmas. On defence and foreign 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 the 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 Budget also includes an extra £10bn of economic and military support for Ukraine. Elsewhere, more than £600m will be invested in projects related to artificial intelligence, including an extra £120m for the UK's AI Security Institute and £100m for a national AI Biosecurity Lab. A £7m fund will explore a possible future bid to hold the Olympics and Paralympics in northern England, and a fund to tackle misogyny in schools, at work and in communities will receive £15m. The Office for Budget Responsibility predicts the UK economy will grow by 1.2% this year, up from a previous estimate of 1.1%, before slowing to 1% next year, a downgrade from the watchdog's previous forecast of 1.6%, then lifting back to 1.6% in 2028. Inflation is predicted to average 3.1% this year and 3.4% in 2027 before declining to the government's 2% target in 2028. Government borrowing is predicted to be higher than previously expected in every year of the forecast, although borrowing as a proportion of GDP is forecast to fall from 4.2% this year to 1.8% in 2030/31. National debt is set to rise from 96% of GDP this year to 97% in 2028/29 before falling back to 96% in 2031.