Chancellor John Healey has set out his first Budget with a bid to provide “breathing space” for the public amid a difficult domestic economic situation made worse by the turmoil of the Iran war.
Here, the Press Association takes a look at the key spending pledges and economic announcements the Chancellor has outlined.
Fiscal headroom and energy measures
Mr Healey has lowered his fiscal headroom – the buffer the Government has above its self-imposed spending rules – to £15 billion in 2029-30. This is down from the £22 billion Rachel Reeves set out last year through raising taxes, but he said it would rise to match that figure in 2030-31.
A “cost control framework” to drive down bills will be brought in, he said. Standing charges on gas bills will be scrapped from next year, with fixed costs to be paid on the unit rate instead. The Treasury said this could save 60% of households an average of £45 on their annual bills. Similar reforms will follow for electricity bills, Mr Healey said.
A VAT cut on electricity will be extended to July, which the Chancellor said would take £50 off the annual price cap. Energy payments of £100 will go to around 20 million households in council tax bands A to D. A green levy – the Gas Shipper Obligation to fund hydrogen projects – will be axed from energy bills and put on to general taxation.
Banking, gambling and motorists
There will be a temporary rise in the bank surcharge, currently levied at 3% on top of the 25% corporation tax rate, by an extra 3% to help fund energy support.
Gambling taxes will be hiked to pay for a high street support package, including by increasing machine games duty from 20% to 25% for higher stakes machines.
The fuel duty freeze has been extended for the 16th year at 52p a litre, cancelling a planned increase set for January. A higher tax-free mileage allowance of 55p will be made permanent.
Business, Isas and workers
The Chancellor pledged a further £20.4 billion for the National Wealth Fund and the British Business Bank over the coming years. He said he would triple the trade allowance – the amount you can earn from a new venture tax-free – from £1,000 to £3,000, and bring in a new allowance to cover a year of living costs for young entrepreneurs. The British Business Bank will double its commitments to women-led businesses and funds to £200 million.
The plan to slash the annual Isa allowance from £20,000 to £12,000 has been scrapped.
The minimum wage for both under and over-21s will rise by 3.9%, ending the trend of hiking pay for those aged 18 to 20 on the national minimum wage more than older workers on the national living wage. The Chancellor vowed to replace the Carers’ Allowance cliff-edge, which has penalised unpaid carers for going over their earnings limit, with a taper system. Parental pay will be expanded to more than 150,000 parents each year, with self-employed fathers and partners made eligible for the first time.
Pensions, defence and other announcements
Pensioners on low incomes will be shielded from income tax, as a new tax allowance is to be introduced for pensioners if increases to their payments take them over the threshold of £12,570.
Mr Healey said he would “fully fund” Britain’s defence investment plan (Dip), Sir Keir Starmer’s plan that promised £15 billion but only committed £10.3 billion to fund it. The funding would come from moves including “capital reprioritisation across Whitehall”, the Chancellor said. Details of how the UK will meet its Nato commitment to spend 3.5% of GDP on defence by 2035, with a target of 3% in 2030, will be set out at next year’s spending review. Ahead of that, he will launch a new “innovative defence finance taskforce”.
Other measures include: a £7 million fund will be used for a feasibility study into a possible future bid to hold the Olympics and Paralympics in northern England; an initial £285 million will be allocated as part of a plan to give mayors and regional leaders in England more money and power to invest in projects in their areas; and a further £432 million will be committed to the rough sleeping programme to get people off the streets in England.
