Chancellor John Healey delivers first Budget with energy and welfare measures

Chancellor John Healey has delivered his first Budget, introducing measures intended to provide "breathing space" for households amid economic challenges exacerbated by the war in the Middle East.

Welfare and Pensions

John Healey pledged there will be a "reduction in the benefits bill" before the next general election, stating it is "simply not good for Britain or progressive to have a bigger and bigger benefits bill."

Specific details on welfare reform are expected following two major reviews to be published in November. One review, co-chaired by Labour minister Sir Stephen Timms, will focus on disability benefits, while another, led by former minister Alan Milburn, will focus on young people not in education, employment, or training (Neet).

Regarding pensions, the government has pledged to reform the state pension triple lock from 2030. The Chancellor confirmed that the state pension will rise to £13,036 from April, and pensioners whose only income is the full new state pension will not pay income tax.

Energy and Cost of Living

To assist with rising energy costs, the government announced a £100 "Household Energy Payment" for approximately 20 million households in council tax bands A to D in England. Wales and Scotland have indicated they will match or replicate the payment. This scheme is expected to cost £2.6 billion.

Other energy measures include:

• Scrapping gas standing charges in England, Scotland, and Wales in 2027 "or as soon as possible after."
• Extending a VAT reduction on electricity to July, which the Chancellor said would remove £50 from the annual price cap.
• Removing a green levy that funds hydrogen projects, transferring the cost to general taxation.

Taxation and Business

To fund energy support, the government will implement a temporary 3% increase to the bank surcharge, on top of the existing 3% surcharge, for a period of 15 months starting in January.

Other tax changes include:

• Increasing machine games duty from 20% to 25% for higher-stakes gambling machines.
• Increasing rates of tax on income from property and savings by two percentage points from April 2027.
• Raising the threshold for small business rates relief for retail, hospitality, and leisure businesses from £12,000 to £18,000.
• Extending the fuel duty freeze at 52p a litre for a 16th consecutive year.

Why it matters

The Budget arrives amid economic volatility. The Office for Budget Responsibility (OBR) forecast that welfare spending is expected to rise to £431bn in 2031/32, driven by health-related and pensioner benefit spending. While the Chancellor aims to eliminate the budget deficit within three years, the Resolution Foundation warned that typical annual energy bills are expected to reach £1,750 after government support in 2026-27.

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Sources

• bbc.com: John Healey promises reduction in welfare bill before next election
• business-live.co.uk: UK Budget at a glance: What has Chancellor John Healey announced? | Business Live
• standard.co.uk: Budget 2026: Key points as announced by Chancellor John Healey in tax and spend speech | The Standard
• express.co.uk: John Healey's Budget ripped apart by experts as household bill to soar | Personal Finance | Finance | Express.co.uk
• scottishfinancialnews.com: John Healey promises ‘breathing space’ in first Budget as banks fund energy bill support | Scottish Financial News

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.