Chancellor John Healey will present his first Budget on Wednesday, with measures expected to include a tax increase on banks, a £1bn boost for council housing, and a rise in the tax-free personal allowance for low-income pensioners. The announcement comes as new Prime Minister Andy Burnham has pledged to bring "hope" back to Britain while facing difficult choices amid ongoing Middle East conflict.
Healey will unveil his plans in the Commons from around 12.30pm, having acknowledged that Britain finds itself in a "tough" position. The Budget is expected to rule out increases to income tax, national insurance, and VAT, honouring a long-standing Labour manifesto commitment from the 2024 general election.
Bank Tax and Council Housing Plans
Mr Healey is planning to increase taxes on the bank sector, of which the biggest four collectively made about £15bn profit in the first six months of this year. Options include reversing a reduction in the surcharge that banks pay on corporation tax, from 8% to 3%, or raising the bank levy, a small percentage charged on loans.
The Institute for Public Policy Research has recommended generating £1bn from a temporary surcharge on commercial banks' windfall profits, saying the proposals would help rebuild the Chancellor's fiscal buffer, which it estimated has dropped by up to £15bn since the spring.
Britain is set for a £1bn boost to council housing in the Budget, which can deliver up to 10,000 homes. The announcement will take the total capital investment in the Social and Affordable Homes Programme to more than £40bn over the next 10 years. The government also plans to help more councils borrow for housebuilding by extending preferential rates.
A Treasury spokesman said: "For years families have been locked out of a secure and affordable home because we simply haven't built enough. The Prime Minister promised to restore the public housing stock. This Budget will go further on that ambition through significant investment in affordable housing and helping councils borrow to build so we can replace what has been sold and give people a place to live."
Energy Bills and Pension Changes
The PM has already moved to offer relief on energy bills, cutting VAT on household electricity bills from 5% to zero, saving a typical household £45 a year. With energy bills expected to rise at the start of next year, more support is expected, possibly boosting the Warm Home Discount, a £150 reduction on bills for around six million households on means-tested benefits, with another £100 of support.
Earlier this month, Energy Secretary Miatta Fahnbulleh told Energy UK's annual conference in London: "We know we need to do our part to give people a little more breathing space." Healey told ITV News: "Energy costs are punishing at the moment. We will do what we can in the Budget, both for business and for households, to give people a bit of breathing space."
The Chancellor is expected to announce a rise in the tax-free personal allowance for low-income pensioners. The new state pension is set to rise by £489 to £13,036 a year from next April, pushing it above the tax-free allowance of £12,570 for the first time. The Times reports that this will be done by raising the personal allowance for low-income pensioners to £13,036, shielding almost one million pensioners from paying income tax. The move is expected to cost taxpayers £200m a year by the end of the decade.
Mayors, Rough Sleeping, and Other Measures
Mayors and regional leaders are to be handed more money and more powers to help transform communities, giving local officials more flexibility and authority to make investment decisions. The government has allocated an initial £285m next year, with the move intended to end the reliance on different bidding pots managed from Whitehall.
At the weekend, Mr Burnham announced funding behind his pledge to offer every rough sleeper a bed this Christmas will be doubled at the Budget. No10 said cash to be unveiled on Wednesday will commit a further £432m to tackle rough sleeping, boosting total funding to £874m. Mr Burnham said: "Rough sleeping isn't a fact of life. It's a thing governments either choose to accept or don't. Well I don't accept it. That's why we're doubling funding so that people aren't just offered a safe route off the streets this winter but have that same support right through the rest of this Parliament too."
Online giants such as Amazon and eBay could be forced to collect tax from all foreign sellers for the first time under plans to close a loophole, raising £1bn for the Treasury to cut business rates for high street shops. Websites would be forced to collect VAT from other retailers where they have a turnover of more than £90,000 a year, regardless of where they are based.
With oil prices soaring due to the US war with Iran, Mr Healey could freeze fuel duty, saving cash for millions of motorists. The Road Haulage Association has called for a 15p per litre rebate for "essential users of fuel", including HGV drivers, coach drivers, and van drivers. The Chancellor has also considered expanding the so-called mansion tax, which sees properties worth more than £2m subjected to an annual levy of between £2,500 and £7,500 from April 2028, with plans to lower the valuation threshold to £1.5m, drawing an extra 200,000 homes into the tax's scope. However, Labour MPs believe the plans have been dropped.
One thing not expected is a hike in capital gains tax, having been ruled out by the Chancellor after being told it could end up costing the Government money if wealthy people leave the country or defer selling off assets.
