UK finance minister Healey outlines budget with smaller fiscal buffer amid global shocks

Finance Minister John Healey delivered his first budget on Wednesday, emphasizing support for working families and businesses while acknowledging the impact of global economic storms, including trade tensions and the ongoing war in Ukraine. He said the budget is built on fiscal discipline and aims to use part of the fiscal headroom created last year to mitigate the effects of the Iran war on the economy and household budgets.

"That's what a buffer is for. Use it when you need it. Rebuild it when you can," Healey said, noting that the Office for Budget Responsibility (OBR) still shows a £15 billion buffer against the stability rule for 2029/30, rising to £22 billion in 2030/31. He projected borrowing to fall to 4.2% of GDP this year and to reach 1.8% by 2031/32, with the overall debt ratio slipping from 83.8% to 81.7% over the same period.

The OBR upgraded its growth forecast to 1.2% for this year and 1.0% for next year, with longer-term rates between 1.6% and 1.8%. Healey highlighted recent upgrades from the Bank of England and the IMF as evidence that the economy can exceed expectations.

To ease household energy costs, the budget introduces a £100 "Household Energy Payment" for 20 million low-income households, a £2.6 billion scheme paid directly to bank accounts. A time-limited 3% bank surcharge will fund immediate energy-bill support, and the planned Gas Shipper Obligation levy is being scrapped in favour of direct government funding for hydrogen projects.

Tax measures include a rise in Machine Games Duty from 20% to 25% for high-stake machines, a £10 million alcohol duty relief for small brewers, and the continuation of business-rate relief for adult gaming centres and vape shops. The National Minimum Wage and National Living Wage will increase by 3.9% for 2.3 million low-paid workers.

Defense spending remains fully funded, with a new Innovative Defence Finance Taskforce and a £5 billion investment plan for defence, dual-use technology and sovereign capability. Housing initiatives feature a £4.7 billion equity-loan scheme for first-time buyers and an additional £1.5 billion for affordable housing, bringing total council-housing backing to £40 billion.

Healey also announced reforms to the tax system, including increased HMRC funding for compliance, changes to the taxation of company profit withdrawals, and modernization of foreign sovereign investment rules. Savings incentives will keep the cash ISA limit at £20,000 and introduce a "Starter ISA" for new investors.

Support for entrepreneurs includes tripling the trading allowance to £3,000, a new Young Entrepreneurs Allowance covering living costs, and doubled funding for women-led businesses through the British Business Bank. A British Data Centre Covenant and an AI Challenge Prize aim to boost technology investment and public-service innovation.

Finally, the budget commits to devolving 100% of business-rate revenue locally by 2030, with a share of business-rate receipts and income-tax proceeds earmarked for mayors from 2028 onward.