Healey Raises Taxes on Banks and Landlords to Pay for £100 Winter Handout

Chancellor John Healey used his first budget on Wednesday to announce a £100 winter payment for around 20 million households, paying for it with higher taxes on banks, landlords and savers. Official forecasts published alongside the speech suggested the cost of living squeeze has no clear end date.

Healey blamed "global economic storms" for the difficult outlook, pointing to the war in Iran and its effect on oil and gas prices. His hour-long address to MPs was low-key and contained few surprises, and he stressed that he would stay within Labour's self-imposed fiscal rules, mindful of nervous bond markets.

The payment will go to every English household in council tax bands A to D and costs £2.6bn. That sum includes money for the Scottish and Welsh governments, which Healey said he hoped would use it for a similar scheme. He described the package as a way to "take the pressure off in the coldest months, and see people through to the spring".

The chancellor also scrapped fuel tax rises planned by his predecessor Rachel Reeves and extended an earlier VAT cut on electricity until next summer. For businesses, he raised the rates relief threshold for retail, hospitality and leisure firms from £12,000 to £18,000, funded by higher taxes on gambling and vape shops.

To pay for the household support, the additional levy on bank profits will double to 6% for 15 months, a smaller increase than some in the industry had feared, and bank shares were among the biggest risers in the FTSE 100. Tax rates on income from property and savings will also rise by 2p, a move that was not expected.

That increase drew criticism. The Office for Budget Responsibility said it risks "leading to a steady rise in rents" by deterring landlords and reducing supply. Laura Suter of AJ Bell said savers face "another hefty tax rise" and that landlords could raise rents or sell up. Ruth Curtice of the Resolution Foundation said the payment was badly targeted and that the poorest needed more generous help, while the New Economics Foundation said the chancellor had shown "the right instincts but not yet the right scale".

The forecasts were sobering. The OBR's David Miles described a "pretty grim picture" as inflation rises to almost 4%. Growth next year is expected to be 1%, about half a percentage point below the March forecast, and real disposable incomes are projected to be only 2% higher by 2030-31 than before the Covid pandemic. EDF predicts the Ofgem price cap will rise by £466 in January.

Higher inflation and interest rates have added £14bn to the government's interest bill this year. The OBR said Healey would still meet the main fiscal rule, with headroom of £15bn by 2029-30 compared with the £24bn Reeves had built up in the spring. He promised to rebuild the buffer to £22bn by the end of the forecast period, saying: "Use it when you need it, rebuild it when you can."

Conservative leader Kemi Badenoch said Britain had "overspent, overborrowed and overtaxed" and argued that deferring decisions to next year's spending review suggested Burnham was keeping an early general election open. Burnham rejected that, saying he could rule one out for at least 12 months. The Institute for Fiscal Studies' Helen Miller warned that the spending review will be a "crunch point" for many departments. The budget also hinted at looser visa salary thresholds in some industries, new powers for Sadiq Khan to extend the Bakerloo line, and funds to explore an Olympic bid from a northern city.