John Healey has delivered his first Budget as Chancellor, announcing a £100 energy payment for 20 million households, an extension of the VAT cut on electricity and a temporary doubling of the tax surcharge on banks, while the government's room against its main fiscal rule has fallen since the spring.
The statement to the Commons on Wednesday 28 October is the first fiscal event of Andy Burnham's government. Healey, who replaced Rachel Reeves at the Treasury on 20 July, has sought to offer households relief on energy bills this winter while keeping to the fiscal rules he inherited.
HM Treasury's Budget document, published alongside the statement, says the stability rule is met by £15bn in the target year of 2029-30, rising to £22bn in 2030-31. The £15bn figure is down from £23.6bn at the March forecast, according to MoneyWeek and Portfolio Adviser.
The Treasury attributes the fall to the cost of servicing government debt. The document states: "The stability rule is met by £15 billion in 2029-30, before rising to £22 billion in 2030‑31. Higher debt interest costs from the conflict more than account for the reduction of headroom in 2029-30 since Spring. This is what a buffer is for"
The Chancellor told MPs the Budget would put the government on course to eliminate the current budget deficit within three years, according to Reuters' record of the speech. That refers to day-to-day spending rather than total borrowing. Figures from the Office for Budget Responsibility reported by LBC put overall borrowing at 1.8% of GDP in 2030-31.
The centrepiece for households is a £100 "household energy payment" this winter for homes in council tax bands A to D, which the Treasury says covers 20 million households. The cut in VAT on domestic electricity from 5% to zero, which took effect on 1 October and was due to end in March 2027, is extended to July. Healey said the extension takes £50 off the annual price cap, and the Treasury has not made the cut permanent.
Gas standing charges are to be scrapped. The Treasury estimates an average saving of £45 a year for three in five households. The gas shipper obligation, a planned levy to fund hydrogen projects, is also abolished, with the Treasury meeting the cost. Fuel duty is frozen until July, extending the temporary 5p cut.
In a video message before the statement, reported by PA, Healey said: "This Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good."
Banks will pay for part of the package. Payment Expert, citing the Budget document, reports that the corporation tax surcharge on banks rises from 3% to 6% on 1 January 2027 and returns to 3% on 1 April 2028, raising about £1.48bn over three years. The Treasury says the temporary period "will not be extended".
For small businesses, the tax-free trading allowance for a new venture rises from £1,000 to £3,000 and a new young entrepreneurs' allowance will cover a year of living costs, according to TheBusinessDesk and other reports. The small business rates relief threshold for retail, hospitality and leisure rises from £12,000 to £18,000.
On welfare, LBC reports that face-to-face benefit assessments will return. LBC reports Healey said he would cut the welfare bill in a "Labour way" and that the Budget keeps Labour's manifesto pledge not to raise taxes on "working people".
PA reports a further £10bn in economic and military support for Ukraine, and says the plan to spend 3.5% of GDP on defence by 2035 will be set out at the spending review.
The OBR forecasts growth of 1.2% this year and 1% in 2027, according to LBC and CNBC, with debt peaking at 83.8% of GDP before easing to 81.7%.
MPs debate the Budget on 29 October and on 2 and 3 November.
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