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- Caroline Mercer via Fortune | FORTUNE
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UK chancellor John Healey unveils winter energy support and bank tax rise
ReUK chancellor John Healey unveils winter energy support and bank tax rise
In his first budget statement, Chancellor John Healey offered a one-off payment and energy bill relief to households, funded partly by a higher levy on banks, as the Iran war pushes up costs.
British Chancellor of the Exchequer John Healey used his first budget statement on Wednesday to offer households and businesses support with energy bills this winter. He blamed what he called “global economic storms,” and said the Iran war was not something the British government wanted. Healey said his “choice in the budget today is to give families and businesses some breathing space now.”
The centrepiece is a 100-pound payment, worth about $133, that will be made once this winter to 20 million lower- and middle-income households. The package also extends a cut in the sales tax on electricity bills and abolishes a charge paid on gas bills. Energy bills are set to spike sharply in the coming months, as the conflict and bottlenecks in the Strait of Hormuz have squeezed global oil and gas supplies and pushed prices higher.
Healey described the pressure on families in direct terms. “For families, that means higher prices at the pump, higher energy bills and higher mortgages,” he said in the statement. “For businesses, higher running costs and more expensive loans.” He added that the impact is felt in the public finances too, noting that driven by the Middle East conflict, government borrowing costs across the G7 are reaching highs not seen for decades.
With public finances already stretched, Healey announced tax rises to pay for the measures. The surcharge on bank profits has been raised from 3% to 6%, but only for 15 months from January, since banks have benefited from higher interest rates. Another revenue source will come from the gambling sector through an increase in machine games duty. “Amid global economic storms, I am looking to our banks to help fund breathing space for British families,” Healey said.
Healey said the British economy has been more resilient than anticipated this year and will grow by 1.2% in 2026, more than previously predicted. He also warned that inflation is higher than predicted earlier this year and likely to remain so for the coming year or two. Inflation in the UK has risen to a near one-year high of 3.5% and is expected to rise further in the coming months. As a result, the Bank of England is expected to raise interest rates soon, which will further increase the government’s cost of servicing its debt.
Outside the energy support, the overall budget was low-key, at a time when bond markets are fretting over debt levels around the world. France has recently been in the spotlight after a wave of protests exposed the strained state of its finances. For Healey, the main constraint is the same one that confronted his predecessor Rachel Reeves: the country’s debt. Public debt has passed 3 trillion pounds, about $4 trillion, for the first time ever, and requires 8% of government spending to service. Healey said forecasts from the independent Office for Budget Responsibility show the UK will spend 14 billion pounds more on debt interest this year. “Those are the storms we face,” he said. “We can’t wish them away.”
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