Healey's first budget offers modest relief but raises concerns over household income
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Chancellor John Healey introduced measures such as a £100 energy bill credit for low-income households, but economists warned the budget does little to improve real household disposable income.
Chancellor John Healey presented his first budget, featuring a £100 reduction in energy bills for the poorest households and an extension of the VAT cut on electricity. The package also includes a 3.9% rise in the minimum wage for 2.3 million workers, a temporary increase in the bank surcharge from 3% to 6% for 15 months, and a 2% hike in tax on income from property and savings starting in April.
The Office of Budget Responsibility said the UK's economic and fiscal situation remains very challenging after years of shocks and stagnation, noting virtually no growth in per-person real household disposable income since before the pandemic. Professor David Miles of the OBR described the outlook as "pretty grim" and "a dismal period in British economic history."
Helen Miller, director of the Institute of Fiscal Studies, characterised the budget as a "raft of fiddly measures" that are unlikely to boost growth, and warned that pending decisions on disability benefits, youth support, social care and defence spending remain unresolved. She also cautioned that higher property taxes could lead to increased rents.
Opposition parties criticised the budget, with the Conservative leader calling it a "dereliction of duty" and the Liberal Democrats labeling it "shameful". The Treasury forecast GDP growth at 1% for 2027, down from an earlier 1.6% projection, citing global economic pressures and higher borrowing costs.
Labour’s Resolution Foundation noted that the £100 energy-bill relief would cover about 20 million homes but would offset less than one-fifth of the projected 38% rise in average energy costs by 2027. The Trades Union Congress welcomed the bank surcharge increase but called for stronger support for manufacturers facing high energy expenses.
Healey pledged to steer the economy through global challenges and hinted at a spending review next year to outline how public spending could reach 3.5% of GDP by 2035.