Budget 2026: John Healey offers £100 payment to households to help navigate ‘global economic storms’

Cash to 20m households part of package to help cut energy bills and ease cost-of-living crisis

John Healey promised to steer Britain through “global economic storms,” as he announced a package of measures to cut consumers’ energy bills in his first budget.

The chancellor said 20m households in council tax bands A to D would receive a £100 payment – a measure he said would cost £2.6bn. A VAT cut on electricity bills will be extended to next July, added Healey.

As widely expected, Healey cancelled fuel duty rises pencilled in by Rachel Reeves and announced he would echo her approach of shifting energy levies on to general taxation.

Earlier, Healey had announced that the gas standing charge would be abolished, perhaps as soon as next year – a move expected to cut utility bills for 60% of households, with the costs met by heavier users.

Healey blamed the ongoing war in the Middle East for the deterioration in the economic outlook since Reeves’s spring statement, but insisted he would keep Labour’s deficit-reduction plans on track.

“Analysts like to speak of economic headwinds, but what we face today are global economic storms,” he said, describing his statement as “a budget built on fiscal discipline, which matches immediate action today with clear direction for the future.”

He said higher inflation as a result of the Iran war was expected to cost the government £14bn more in interest costs and the Office for Budget Responsibility (OBR) had downgraded its growth forecast to 1% for next year, from the 1.6% it expected in the spring.

Nevertheless, Healey promised to meet Labour’s first fiscal rule, on balancing current spending with tax receipts by 2029-30; but with diminished headroom of £15bn – against the £24bn that Reeves set aside in March.

But he said the cushion would be rebuilt to £22bn, by 2030-31. “That is what a buffer is for. Use it when you need it, rebuild it when you can.”

As a result of continued high oil prices as a result of the Middle East conflict, the energy price cap, which determines household bills, is expected to increase sharply in January.

Healey signalled a radical reform to the way energy bills are charged in the longer term – calling it, “a new cost control framework, to drive down all aspects of energy bills.”

Healey said the energy package would be funded by a windfall tax on Britain’s banks - as well as an unexpected 2 percentage-point tax rise for landlords and savers.

He said he would double the additional levy the banks pay on their profits, to 6% from the current 3%, for 15 months from January.

That fell short of the rise to 8% that industry figures had expected. Healey lavished praise on the sector, as he announced the measure. “I want to say directly to our banks: I celebrate and I am grateful for the role that you play,”he said.