Chancellor unveils £100 energy payout, lifts bank surcharge, in maiden Budget

(Sharecast News) - John Healey used his maiden Budget on Wednesday to announce a handful of short-term measures intended to ease the cost of living, including a one-off £100 energy payment, paid in part by higher taxes on banking and gambling profits. However, his speech did not include any major new policy announcements, while tax hikes were not as steep as feared.

The chancellor - who was appointed in the summer by prime minister Andy Burnham - told a packed House of Commons that his Budget was "built on fiscal discipline" but that it would also provide "breathing space" for both the cost of living and doing business.

"Analysts like to speak to economic headwinds. But what we face today is global economic storms," he said.

Acknowledging that inflation had spiked in the months since the US first attacked Iran, Healey said the government would now spend £14bn more on debt interest this year.

He also acknowledged that Britain was, despite the global macroeconomic backdrop, "defying expectations", with some of the highest growth in the G7. The Office for Budget Responsibility now expects GDP to grow by 1.2% this year, up modestly from its March forecast for growth of 1.1%. But the OBR was more downbeat for 2027, forecasting growth of just 1%, well below its previous forecast for 1.6%.

Public sector net borrowing was expected to fall, with the OBR estimating it would decline from 4.2% of GDP in the current financial year to 3.4% in 2027-28. The OBR had previously forecast borrowing of 3.6% in 2026-27, falling to 2.9% in the next year.

Measures announced to ease the cost of living including removing the gas standing charge from next year, with similar reforms expected for electricity bills; extending the 5p fuel duty cut to July; and a one-off £100 energy payment for around 20m households in council tax banks A to D.

To pay for those measures, banks will pay an extra 3% surcharge tax on UK profits above £100m for 15 months from January, taking the total surcharge to 6%. However, that was not as steep a rise as feared, and bank stocks continued to push higher, led by NatWest Group, up 4% at 659.1p, and Lloyds Banking Group, which added 4% to 105.83p.

Healey said: "Our world-leading banks make a huge contribution to this country, in the tax they pay and the jobs and industry they support.

"Amid the global economic storms I am looking to our banks to help give ordinary people breathing space."

Gambling taxes rose, but also were not as steep as feared by some. Healey said that the machine games duty - the tax levied on slots - would rise to 25% from 20%, to help fund rates relief for small businesses. Shares in Rank Group soared 8% to 85.4p, while Ladbrokes-owner Entain spiked 6% to 480.65p.

On the UK's soaring welfare bill, Healey pledged to bring down spending "in a Labour way" and reiterated previously announced plans to reform the pension triple lock. But he declined to detail any new announcements until Alan Milburn and Stephen Timms published their reviews later this year.