Healey Unveils £100 Household Payments in First Budget, Funded by Bank Windfall Tax

Chancellor John Healey has pledged to guide Britain through what he called "global economic storms" as he presented a package of measures to reduce energy costs for consumers. The plan will be paid for by a windfall tax on banks that proved smaller than the industry had anticipated.

In his first budget, Healey said 20 million households in council tax bands A to D would receive a £100 payment, at a cost of £2.6bn. He also extended the VAT cut on electricity bills until next July and, as widely expected, cancelled the fuel duty rises that Rachel Reeves had pencilled in.

Healey argued the steps would help businesses as well as households. "For millions of people, the cost of living and the cost of doing business are the same. The home is the office. The van is the family car," he said.

He blamed the war in the Middle East for the worsening economic outlook since Reeves's spring statement, while insisting Labour's deficit-reduction plans remain on track. "Analysts like to speak of economic headwinds, but what we face today are global economic storms," he said, describing the budget as one "built on fiscal discipline."

Healey said higher inflation linked to the Iran war was expected to add £14bn to the government's interest costs. The Office for Budget Responsibility has cut its growth forecast for next year to 1%, down from the 1.6% it projected in the spring.

He promised to meet Labour's first fiscal rule, which requires current spending to be balanced with tax receipts by 2029-30. Headroom against that rule has narrowed to £15bn from the £24bn Reeves set aside in March, though Healey said it would be rebuilt to £22bn by 2030-31. "That is what a buffer is for. Use it when you need it, rebuild it when you can," he said.

Continued high oil prices are expected to push the energy price cap, which sets household bills, sharply higher in January. Beyond the short-term help, Healey signalled a longer-term overhaul of how bills are charged, calling it "a new cost control framework, to drive down all aspects of energy bills."

To fund the package, he will double the additional levy on bank profits to 6% from 3% for 15 months starting in January. Industry figures had expected a rise to 8%. He also announced an unexpected 2 percentage-point income tax increase for landlords and savers. Healey praised the sector, saying: "I celebrate and I am grateful for the role that you play." Bank shares rose after the announcement, with NatWest and Standard Chartered gaining more than 4%.

For businesses, the business rates relief threshold for retail, hospitality and leisure firms will rise from £12,000 to £18,000, paid for by higher taxes on gambling and vape shops. Healey also set out measures on what he called the "moral mission" of tackling homelessness, including cheaper borrowing for councils, VAT relief on land sales to social housing providers, and confirmation of the My First Home mortgage scheme for first-time buyers, first floated at Labour's party conference in September.