Budget 2026 live: Healey announces £100 energy payment for millions and rise in bank tax | Budget 2026
Healey says people living in council tax A to D band homes to get £100 energy payment
Healey says people living in homes in council tax bands A to D will get a £100 energy payment this winter.
That will help 20m households, he says.
Let me say this to families at home. I know that with the conflict in the Middle East, rising energy bills are a real worry. I know that people look to government at times like this, not to solve all their problems, but to give them a bit of breathing space.
So today I’m taking one further step this winter.
For 20 million households in council tax bands A to D, I’m announcing a £100 energy payment for households.
Key events
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Bank surcharge lift to only raise £1.5bn
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OBR: ‘It’s been a dismal period in British economic history’
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UK bond yields falling as City welcomes ‘dull budget’
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How budget contains record number of measures, but with almost none of them costing or raising £1bn or more
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OBR: tax burden to ‘increase sharply’ to record high
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‘Is that it?’ – Badenoch ridicules budget, claiming big decisions postponed, and Healey should have cut welfare to fund defence
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OBR forecasts no real earnings growth next year
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OBR: probability of meeting the fiscal mandate has fallen to 56%
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OBR: UK’s challenging position has worsened since March
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Gov.uk wobbles as public check out their council tax band
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Healey announces first-time buyer Isa
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Healey says extra funding to tackle rough sleeping being extended
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Healey says spending review will include ‘target date’ for getting defence spending to 3% of GDP by 2030
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Healey says he is delivering most radical act of fiscal devolution in generation
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Healey announces new tax relief for people who set up successful firms
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Healey announces new deal for datacentres
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Bank shares bounce as new surcharge confirmed
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Healey announces 3% rise in bank surcharge, but time-limited for just 15 months
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Healey says business rate threshold going up to £18,000, and other businesses having rates frozen in real terms
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Healey says people living in council tax A to D band homes to get £100 energy payment
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Healey says removal of VAT from electricity bills to be extended
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Growth forecast downgraded for 2027
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Healey says clean energy costs to be taken off energy bills
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Healey says government borrowing falls to 4.2% this year
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Healey defends budget headroom falling to £15bn, saying buffer is there to ‘use it when you need it’
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Healey says borrowing costs have risen £14bn this year
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Burnham says using North Sea reserves can ‘accelerate’ move to a ‘clean energy future’
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Burnham ducks invitation to condemn Steve Witkoff for calling Putin a humanitarian
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Badenoch claims Labour should be saying ‘thank you’ to Tories for their Brexit deal
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Burnham tells cabinet current Brexit deal ‘bad for UK’, as he restates determination to get ‘closer relationship’ with EU
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Bank shares jump on reports budget bank tax will be ‘temporary and below 8%’
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‘My advice to John is don’t delay’ – Zelenskyy urges UK to speed up raising defence spending
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Green leader Zack Polanski says budget could be ‘betrayal of future’, after it emerges tax forecasts assume Rosebank going ahead
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Healey also looking at removing standing charges from electricity bill, Martin Lewis says
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Investment firms welcome reports that cut to cash Isa allowance to be reversed
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Getting rid of standing charges on gas bills really ‘sleight of hand’, Tories claim
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Green party says ‘business-as-usual budget’ won’t deliver hope
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Money saving expert Martin Lewis welcomes gas standing charge abolition, and says further energy bills support likely in budget
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John Healey says scrapping gas standing charges will save 60% of homes £45 a year
Bank surcharge lift to only raise £1.5bn
Kalyeena Makortoff
The chancellor’s cautious bank tax hike will raise just under £1.5bn over its 15-month run, budget forecasts show.
That’s far short of the £2bn that TUC said could be raised per year had the industry-specific bank surcharge – which is on top of basic corporation tax – been hiked back to 8% from 3%.
The budget forecasts show the surcharge hike, which is due to run from January 1 2027 to March 31 2028, will raise:
However, the Office for Budget Responsibility said HMT receipts will be knocked by banks reactively moving some operations out of the UK:
“Over the 15 months this is in effect, it is estimated to yield a total of £1.5 billion. This is net of an estimated £190 million reduction in receipts as some banks are assumed to move profits out of the UK in response to the higher tax rate. The size of this effect is uncertain.”
Sky News is reporting that JP Morgan will end up paying an extra £100m-£150m as a result over the 15-month period.
UBS analysis published before the budget showed that an increase to 6% would raise at least £763m per year from the four UK big banks alone (that’s Lloyds, NatWest, HSBC and Barclays).
The TUC have welcomed today’s “common sense” bank tax, even though John Healey has only raised the bank surcharge to 6%.
TUC General Secretary Paul Nowak said:
“As Trump’s illegal war in Iran continues to cause havoc with the global economy and drive up costs, the Prime Minister and Chancellor have started to give families and firms much-needed breathing space.
“The TUC has long called for banks to pay their fair share. At a time when millions are struggling to get by, taxing banks’ bumper profits to cut energy bills is plain common sense. The chancellor has made a good start by doubling the bank surcharge – next he should be prepared to extend it and raise it if profits remain sky high.
OBR: ‘It’s been a dismal period in British economic history’
The outlook for real household disposable income (RHDI) in the UK is “a pretty grim picture”, Prof David Miles of the OBR has warned.
[Reminder: the OBR has cut its forecast for RHDI per person, and expects it will fall slightly in the near term.]
Speaking to reporters, Miles explains:
If you go back to just before Covid, and take that as your base, where we are right now – seven years later, is virtually no growth in per person real household disposable income.
That’s pretty unusual in the history of the UK.
To a substantial effect it is caused by higher energy costs, Miles explains, which the UK can’t avoid as it is a net energy importer.
Looking back over the last decade, Miles bemoans “it’s been a dismal period in British economic history.”
The Office for Budget Responsibility is running through its latest forecasts now, at a press briefing in London.
They are highlighting the “challenging fiscal background”, the tough economic forecasts for 2027, and the fact the UK is still on track to hit the fiscal rules – in the face of a lot of “upside and downside risks”.
UK bond yields falling as City welcomes ‘dull budget’
John Healey appears to have achieved an important duty for chancellors on budget day – don’t crash the bond market!
UK bond prices are slightly higher today, which has pulled down the yield (effectively the cost of borrowing) on these gilts.
30-year bond yields, for example, are down 4 basis points (0.04 of a percentage point) at 5.698%. That pulls them further away from the 28-year high over 6% hit earlier this month.
The chancellor is being rewarded for a relatively quiet budget (despite the large number of measures).
Matthew Amis, investment director at asset manager Aberdeen, says:
“The gilt market wanted dull and they got exactly that. With oil and gas prices this high and with one eye on France, a dull budget is what was needed.
All of the major obstacles presented to Chancellor Healey were avoided, as such gilts yields are slightly out-performing. Is this a gilt positive budget? Not particularly, but in the context of this year that is good enough. 2027 is going to present another fiscal challenge for Chancellor Healey, but today’s budget should provide enough to reassure gilt investors going into the final months of 2026.”
How budget contains record number of measures, but with almost none of them costing or raising £1bn or more
Most budgets have three or four big, headline measures – tax rises or tax cuts worth several billion pounds a year. As Sky’s Ed Conway reports, this budget was unusual, because it contained an unprecedented number of measures, but their average value was (in budget terms) minimal.
Two key snap charts on the Budget…
1) in sheer numbers of policies, it’s the “busiest” budget in modern history. 98 different scorecard measures(!)
2) BUT the average VALUE of those measures was the smallest on record. Every little helps? Or too much fiddling? Views may differ
Here are the two charts from Conway that illustrate this.
There is only one measure in the budget scorecard that will cost more than £1bn in 2026-27 (apart from extra money for the defence investment plan announced in June). That is the £100 household energy payment for people living in less expensive homes, which will cost £2.6bn.
It is also a budget that does not feature big tax rises. The increase that will attract the most media attention is the rise in the bank surcharge, but that only raises £305m this year, and £959m next year. The only tax rise in the budget that will raise more than £1bn a year is a reduction in the main rate for the writing-down allowance. It will raise just over £1bn a year by 2028-29.
OBR: tax burden to ‘increase sharply’ to record high
The OBR report says the tax burden is forecast to “increase sharply” to a record high. It says:
In the central forecast, total public sector receipts are projected to rise as a share of GDP from 40.1 per cent of GDP (£1.2 trillion) in 2025-26 to 42.9 per cent of GDP (£1.6 trillion) in 2031-32.
Within this, as chart 4.1 shows, National Accounts taxes as a share of GDP (the ‘tax take’) are forecast to increase sharply from 36.0 per cent of GDP in 2025-26 to 37.9 per cent of GDP in 2027-28, surpassing the previous historical high, before then rising more gradually to reach a peak of 38.6 per cent of GDP at the end of the forecast period. This would be a 5.7 per cent of GDP increase on the pre-pandemic level of 32.9 per cent of GDP in 2019-20.
The OBR report confirms today’s Guardian story saying the Treasury estimates for future tax revenues are based on the assumption that the Rosebank oilfield will go ahead. (See 10.25am.) It says:
These forecasts [for oil and gas tax receipts] are based on the North Sea Transition Authority’s (NSTA) projection for total oil and gross gas production … This shows that production has been declining since the start of the 2000s and that this decline is expected to continue at around 10 per cent a year over 2027 to 2031. The projection includes production from currently producing fields (including Jackdaw), and the NSTA’s estimate of production from development of new fields, which includes Rosebank, and from future discoveries. The forecast annual pace of decline would be around 14 per cent a year if there were no production from any new fields.
The squeeze on mortgage-holders is going to get worse over the next few years.
The OBR has calculated that the average effective interest rate on the outstanding stock of mortgages will rise from 4% in 2026 to 5% in 2031.
That’s because mortgage rate have risen in line with the jump in government bond yields since the Iran war began, which will catch people who roll off mortgages that were fixed when rates were lower.
The OBR says:
…mortgage payments as a share of household disposable income are expected to rise to reach 4¼ per cent in 2031, the highest since 2009 and more than double the 2021 level of 2 per cent.
Mark Rutte, the head of Nato, has welcomed John Healey’s pledge to spend 3% of GDP on defence by 2030.
Posting on X, Rutte says:
Good news on the new budget from @JohnHealey_MP with a strong commitment on defence.
The UK role in transatlantic security is vital, and I welcome this move to put 🇬🇧 on a credible path towards meeting the commitment made by all NATO Allies in The Hague – to ensure we’re all investing what’s needed to remain ready & able to deter aggression and defend our freedom and security
As covered earlier, Healey told MPs that next year’s spending review would set out details of how the UK will meet the target of spending 3.5% of GDP on defence by 2035 and 3% by 2030.
‘Is that it?’ – Badenoch ridicules budget, claiming big decisions postponed, and Healey should have cut welfare to fund defence
Here are some of the main points from Kemi Badneoch’s response to the budget.
Most people in the country listening to his budget will be thinking to themselves, is that it? Really? Is that it? The prime minister came in promising to reverse 40 years of neoliberalism. Instead, we got 4p off gherkins.
She also said the budget did not “come close to meeting the moment”.
Unfortunately, just like every other Labour budget, the headline story is the same. More borrowing, more tax rises and surprise, surprise, more money on benefits …
Next year, under Labour, the tax burden will be the highest in our country’s history. OK. And our benefits bill is going up by tens of billions of pounds because this government has put welfare first.
We are overspent, over-borrowed, overtaxed and drowning in an out-of-control welfare system. And this is his answer. It is simply not enough, not good enough, not strong enough, not bold enough …
[Labour MPs] do not understand why it’s a problem that a quarter of all working-age adults are now claiming some form of benefits. They do not understand that if Russia launches an attack on Nato in the next three years, as the government’s own intelligence suggests, we will be at war without the means to properly defend ourselves.
Yes, he has funded the defence investment plan – that is welcome. Yes, there is more support for Ukraine – that is welcome. But he said himself in June that wasn’t enough.
What he’s done is he’s given himself a bit of breathing space until next year. Instead, what we have is a plan to have a plan. I bet Putin’s really scared now.
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She welcomed Healey’s decision to ignore Labour MPs saying he should increase capital gains tax, his decision to pause equalisation of the younger people’s minimum wage with the full adult rate, and the U-turn on cash Isas.
We all know why he’s delayed until tomorrow, difficult decisions he should have taken today. It is because the prime minister wants to keep the option of an early general election.
OBR forecasts no real earnings growth next year
Grim news for workers – the Office for Budget Responsibility is forecasting there will be no real earnings growth in the UK in 2027.
That means inflation will devour every crumb of pay rises the average worker wins next year.
It underlines how 2027 will be a tough year, with growth forecast to fall to just 1%.
The OBR then expects that real wage growth will then recover to around 0.5% a year by 2030, as energy prices drop back. But it warns that real wage growth won’t keep pace with output per worker, as firms will focus on rebuilding their profit margins.
Another blow – the OBR has also cut its forecast for growth in real household disposable income per person, a key measure of living standards.
It says:
Subdued real wage growth, alongside the combined effect of frozen income tax thresholds and higher nominal earnings growth, means we expect RHDI per person to fall slightly in the near term.
RHDI per person then partially recovers as the energy price shock subsides.
OBR: probability of meeting the fiscal mandate has fallen to 56%
The OBR is warning that the government is slightly less likely to keep to its fiscal rules than a year ago.
The watchdog confirms that the fiscal mandate – for the current budget to be in surplus in 2029-30 – is on track, with a margin of £15bn (as John Healey told MPs earlier).
The OBR says:
This is £7bn lower than when the fiscal rules were last formally assessed at budget 2025.
The probability of meeting the fiscal mandate is now estimated at 56 per cent, which compares to a probability of 59 per cent at budget 2025.
OBR: UK’s challenging position has worsened since March
The Office for Budget Responsibility’s latest economic and fiscal outlook – the fiscal watchdog’s assessment of the budget – starts with a sobering warning that “the UK’s economic and fiscal position remains very challenging”.
The OBR cites the “repeated adverse shocks” that have led to weak growth and pushed up government borrowing.
Shocks since the 2008 global financial crisis. “including rising barriers to trade after EU exit, the pandemic, and the 2022 energy price spike”, it says.
And it warns that there have been “further adverse developments” since its March forecast, with both “interest rates and energy prices rising significantly”.
As a net importer of energy, the rise in energy prices constitutes a negative terms-of-trade shock for the UK, which pushes up on inflation and lowers real household disposable income.
This means the OBR now expects UK inflation to average 3.5% in 2027, up from 2% expected in March.
The Treasury’s budget documents are online here.
And here is the Office for Budget Responsibility’s economic and fiscal outlook report.
Gov.uk wobbles as public check out their council tax band
The government’s website seems to be creaking under the pressure as people check what council tax band they are in so they can see whether they qualify for the £100 support payment announced today.
You can check your tax band here: Check Council Tax Band.
But when we try, we get this error message:
Don’t all click at once….
Healey announces first-time buyer Isa
Healey ended by talking about housing.
He said, for people saving to buy a home, a first-time buyer Isa will replace the lifetime Isa.
He ended his speech saying:
The decision I’ve taken today will help steer Britain through and, when the storms pass, what matters is where Britain is heading – a Britain reindustrialised, a Britain with power returned to communities, threats deterred, global opportunities seized.
In our first 100 days, this Labour government has set a course for fresh hope, good growth and support for those who need it.
We know who we are. We know where we’re going. We can see the Britain we want. It’s a vision burnt into every line of this budget statement, breathing space now, fresh hope for the future, delivered to the British people by this Labour government.
