In first budget, UK's Healey tries to shelter households from economic storms
TLT•In his first budget, UK finance minister John Healey announced household energy payments and another fuel duty freeze, while raising taxes on banks, gambling, savers and landlords. The budget watchdog forecast 1.0% GDP growth in 2027 and said the fiscal buffer had shrunk to £15 billion.
1. Household support and taxes
Healey announced a £100 payment for around 20 million households in lower-valued homes to soften rising energy bills, at a cost of £2.6 billion. He also extended the fuel duty freeze until at least July, costing £1.4 billion over the period. Tax increases on banks, gambling, savers and landlords, along with tighter VAT rules for online marketplaces, are intended to help fund the measures and property tax relief for small businesses.
2. Growth and borrowing outlook
The Office for Budget Responsibility said the plans, higher inflation and borrowing costs would add £65 billion to borrowing over five years. It forecast GDP growth of 1.2% in 2026 and 1.0% in 2027, and said Healey's fiscal buffer had fallen to £15 billion from £24 billion. The OBR also warned that living standards would fall before edging only fractionally above their pre-pandemic level by the end of the decade.
3. Market reaction and plans
UK 30-year government bond yields fell as much as 5 basis points to 5.691%, their lowest in more than a month. Shares in banks rose after the government set a 6% levy on profits for 15 months, a three-percentage-point increase; the sector's expected hit was £1.5 billion. Other measures include removing gas bill standing charges for most households and providing more than £20 billion in extra support to state finance institutions for investment in AI, defence and green energy by the early 2030s.
