Chancellor John Healey unveiled a £2.6billion support package for 20 million households in council tax bands A-D in England, who will get £100, paid directly into their bank accounts
Chancellor John Healey unveiled a Budget focused on giving ‘breathing space’ to hard-pressed households(Image: Jordan Pettitt/PA)
Millions of people will get £100 towards their energy bills funded by a tax on banks bumper profits in a Budget to provide “breathing space” for households.
Chancellor John Healey set out measures to shield families and businesses from “global economic storms” as he heaped blame on Donald Trump’s disastrous Iran war for the grim state of the public finances, as well as higher prices at the pump, higher energy bills and higher mortgages.
With energy bills predicted to surge to an average £2,200 a year in January, Mr Healey unveiled a £2.6billion support package for 20 million households in council tax bands A-D in England, who will get £100, paid directly into their bank accounts.
A temporary scrapping of VAT on electricity bills was extended from next March to July, saving the average customer around £50 a year, and a green levy has been stripped from bills. Mr Healey also confirmed he would axe standing charges on gas – a flat fee paid regardless of energy use – with plans to do the same for electricity bills.
“We didn’t want this war,” the Chancellor told MPs. But he added: “Those are the storms we face. We can’t wish them away. We must choose the course we steer through them.”
He promised “to steer us through the global economic storms today, to chart a new course for Britain in the years ahead, to give people fresh hope for Britain’s future”.
Mr Healey chose to slash his headroom – a cushion against future turmoil – to £15billion to avoid putting up taxes. Instead, he went after the banks with a smaller-than-expected hike to a levy on profits, which will rise from 3 per cent to 6 per cent for 15 months from January.
An ally of the Chancellor said: “Just as the public supported banks during the financial crisis, banks are now being asked to contribute towards giving families breathing space.”
He also announced an increase in gambling taxes to pay for business rates relief for high street firms. Some 70,000 shops, restaurants and gyms will be taken out of paying rates altogether.
The Budget was a low-key affair compared to Rachel Reeves’s tax-hiking statements as she sought to repair damage done by years of Tory rule. But while the help was broadly welcomed, the Chancellor was accused by some critics of failing to do enough to mitigate the grim pressures on living standards.
Households will barely be better off in 2029 than they were before the pandemic, as energy shocks from wars in Ukraine and Iran and Covid contributed to a dismal period for living standards, according to the OBR.
Real household disposable income – a measure of how much spare disposable income people have got – has shown “virtually no growth” since the Covid crisis in 2009. The OBR predicted that by 2029, a whole decade on, it might have grown by a pitiful 1%.
“That is practically unheard of in the history of the UK,”, said the OBR’s Professor David Miles. “It has been a dismal period in British economic history”.
Analysis by the Joseph Rowntree Foundation (JRF) found average annual household disposable incomes are projected to fall by £450 over the course of the current parliament after adjusting for inflation.
Andy Burnham said the Budget contained “significant measures” to help Brits with the cost-of-living squeeze. The Prime Minister told reporters: “Well, we aren’t immune, obviously, to the pressures on finances coming from the situation in the Middle East and the impact that that’s having on the cost of fuel, on the cost of energy.
“We can’t insulate people completely from all of those pressures, but within that, we are doing meaningful things to give people that breathing space.”
JRF Group chief executive Julian Hartley said: “People need to feel that paying the rent, heating their home and putting food on the table is becoming easier. Today’s Budget recognises that pressure but falls short of what’s needed. We live in an uncertain world and need long-term policies that build resilience for those who need it most.”
The Resolution Foundation thinktank warned that using the council tax system to deliver energy bill support means around one in eight poorer households who live in higher band properties would miss out.
Chief Executive Ruth Curtice said: “Conflict in the Middle East and global economic turmoil have brought higher inflation and borrowing costs to Britain, challenging the Chancellor to deliver a delicate balancing act of providing cost of living support while keeping borrowing down.
“The Chancellor has missed the mark with badly targeted support that has left families facing a tough winter as energy bills rise.”
Some charities raised alarm at the failure to unfreeze housing benefit which they claim has failed to keep up with the cost of soaring rents. Foodbank organisation Trussell’s Helen Barnard said support for energy bills “will make a real difference as the colder months draw in”.
But she added: “The decision to keep housing support for private renters on low incomes frozen is a misstep that will continue to drive people towards homelessness and to the doors of food banks”.
Big decisions on defence spending and welfare reform have been deferred to next year. The Chancellor said details of how the UK will hit its target of spending 3% of GDP on defence by 2030 would come at the spending review.
