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John Healey has announced a £100 energy payment for 20 million households in council tax bands A to D, paid directly into bank accounts this winter.
Delivering his first budget as chancellor, Healey said the £2.6 billion scheme would “take the pressure off the coldest months and see people through to spring”. He said the Scottish, Welsh and Northern Ireland governments would receive their share of the funding, and called on them to “do the same”.
Healey framed the budget as one “for the working people of Britain, for British businesses, big and small, delivered at a time when global uncertainties and pressures are swirling around the world and hitting people at home”.
He set out three goals, declaring that the government would give Britain “some breathing room” on the cost of living and business costs, bring back enterprise to “unleash innovation and growth in every postcode”, and “address the big challenges on energy, on national security, on public services and transformation, and on housing”.
Healey, who was appointed chancellor by Andy Burnham in July 2026, said the cost of living was being driven up by the war in the Middle East. “Oil has gone from around $70 a barrel to well over $100, and gas prices have nearly tripled since February,” he said. “For families, that means higher prices at the pump, higher energy bills, higher mortgages.”
He told MPs: “My choice in today’s budget is to give families and businesses some breathing room now, and start radical energy reform to reduce bills in the future.”
The budget
The chancellor also extended VAT cuts on electricity through the winter and spring until July, which he said would remove £50 from the annual price cap. He said the Government would ask Ofgem to remove standing charges from household gas bills from next year, and that he would extend the 5p cut to fuel duty until July.
For business, Healey said a new British industrial competitiveness scheme would take 25% off the electricity bill for 10,000 companies from April.
Healey said the support “means raising some taxes to meet my commitment to fiscal discipline.” He said banks will “pay an extra 3% on the bank surcharge”, time-limited “to pay direct support on energy bills starting in January, ending 15 months later”.
He said he would increase machine player duty from 20% to 25% for high-stakes machines, while protecting pub and seaside arcades, to pay support for high streets. Adult gaming centers and vape shops would be carved out of business rates reliefs, he announced.
Healey said he would raise rates on taxes on income from real estate and savings by two percentage points from April 2027, with no change to taxes on dividends or employment income. He said that “88% of people no longer pay tax on their savings.”
Healey said he kept Labor’s manifesto pledge not to raise tax on workers, insisting he “rejected broad-based tax increases or cuts to public services, recognizing that families and businesses need this breathing space.”
The Chancellor further announced that he would raise the threshold for small business relief for retail, hospitality and leisure from £12,000 to £18,000, taking 70,000 more businesses out of business rates.
Healey also announced an additional £430 million to ensure everyone can sleep for the rest of Parliament to get off the streets. “This is a moral mission for me; it is a moral mission for the Prime Minister; it is a moral mission for the Labor Party,” he told MPs.
Healey said he met the government’s fiscal rules, and that the Office for Budget Responsibility (OBR) confirmed the stability against the stability rule of £15 billion in 2029-30, rising to £22 billion in 2030-31. He said that he “used some of the sitting room that was established last year to absorb the impact of the Iran war, to protect the economy and to protect family budgets”.
He said the OBR had upgraded its growth forecast to 1.2% this year, followed by 1% next year.
Office for Budget Responsibility (OBR)
Summarizing, Healey said: “These are my choices, increasing incomes of those who can afford to pay, no tax increases on wages or dividends, cutting taxes for millions of families and businesses.
“Just as the British people helped support our banks 20 years ago, it is our banks that are helping to give families breathing room today…
“In our first 100 days, this Labor government has set a course for fresh hope, good growth and support for those who need it. We know who we are. We know where we are going. We can see the Britain we want to be.”
He concluded: “Air space now, fresh hope for the future, delivered to the British people by this Labor government.”
Reacting to the budget, Conservative leader Kemi Badenoch said Labour’s last two budgets, delivered by Rachel Reeves as chancellor, “weakened our economy before any wars”.
She said: “We are overspending, overborrowing, overpaying and drowning in an extraordinary welfare system, and this is its response. It is simply not enough, not good enough, not strong enough, not bold enough.”
Money bills and financial privilege
