UK budget delivers household energy relief and bank tax hike under Healey

UK Chancellor John Healey has introduced his 2026 budget under Prime Minister Andy Burnham, laying out immediate household relief alongside fresh levies on the financial sector.

Facing high household living costs, the government confirmed that standing charges on domestic gas supplies are being eliminated. According to the Treasury, the policy change will yield annual savings of roughly £45 for about 60 percent of UK households. In addition, residents living in properties classified under council tax bands A through D will be eligible for a direct £100 energy subsidy.

The budget extends the existing suspension of VAT on electricity bills and transfers clean energy policy levies off consumer utility bills. The announcements triggered heavy online traffic as homeowners checked their council tax bandings, briefly causing technical difficulties on the official government website.

To help finance the measures, Healey announced a temporary 3 percent increase in the bank surcharge that will remain in effect for 15 months. The banking sector had anticipated the hike, leading to a modest rebound in financial shares following clarity over the duration of the tax.

The fiscal plan also incorporates a package of business and housing reforms. The government raised the business rates threshold to £18,000 while freezing rates in real terms for other firms, alongside tax relief designed for business founders and a framework agreement concerning data centres. Additional allocations were confirmed for rough sleeping initiatives, while a dedicated Individual Savings Account program was revealed for first-time homebuyers.

Economic forecasts published by the Office for Budget Responsibility painted a difficult backdrop for the Treasury. The independent forecaster downgraded economic growth projections for 2027 and predicted flat real earnings growth over the coming year. The OBR noted that the UK's financial conditions had deteriorated compared to assessments made earlier in the year, trimming the estimated likelihood of meeting key fiscal targets down to 56 percent. Official state borrowing is projected at 4.2 percent of GDP for the year, with total borrowing costs rising by £14 billion. Fiscal headroom shrank to £15 billion, a decline Healey defended by arguing that financial buffers are created precisely to support the economy during demanding intervals.

Opposition parties criticized the package swiftly. Conservative leader Kemi Badenoch claimed the chancellor avoided structural decisions and suggested welfare budgets should have been trimmed to fund defence spending instead. Green Party representatives argued the measures fall short of confronting systemic energy inflation, warning that the removal of standing charges amounts to minor adjustments ahead of projected utility price increases. Prime Minister Burnham countered that the broader economic approach, including the managed development of domestic North Sea reserves, would help bridge the transition toward sustainable energy.