John Healey delivered his first Budget speech today, announcing a 3.9% increase in the minimum wage; a £100 payment to 20 million households; tax rises on banks; an extension of the VAT cut on electricity bills; maintained commitment to spending 3% of GDP on defence; and more.
Before Healey's speech at Prime Minister's Questions, Kemi Badenoch, the Leader of the Opposition, stated that Healey 'needs to get welfare down' and 'he needs to get people's taxes down', to which the Prime Minister Andy Burnham responded 'the Chancellor will stand up and show that we will get that growth going across the country.'. He then insisted that 'manifesto red lines are still in place'.
Healey began his speech by declaring that 'this is a budget for the working people', before praising his predecessor Rachel Reeves, something that was met by immense jeering from the House, prompting the Deputy Speaker to step in. Once the jeering subsided, Healey joked about the PM's recent appearance on Gogglebox. He then maintained that he 'kept the Labour manifesto promise not to raise taxes'.
Among the things announced in Healey's speech was a removal of gas standing charges. These are minimum charges paid by every household in the country regardless of gas usage. This costs households around 30 pence per day, equating to around £103.32 per year.
Healey also announced a £100 payment to all households within the A-D council tax brackets. This means around 20 million households will receive £100, designed to help with energy bills in the winter. This will not be a discount in bills however, but will be deposited directly into bank accounts, meaning that this £100 could theoretically be spent on anything. Healey said that this grant will cost £2.6bn. This announcement led to the government's official council band checking website to crash.
The minimum wage is set to rise again, this time by 3.9%, taking minimum wage above £13 an hour for the very first time. This rise was reported before the official speech, and thus was not a surprise, but the decision has been met with mixed reactions, it had been criticised for increasing the costs for businesses to employ workers, which will lead to businesses laying off workers and/or increasing prices, whereas it has been praised by some for increasing living standards for those on the very bottom rungs of the socioeconomic ladder.
The threshold for Small Business Rate Relief for retail hospitality and leisure businesses has been increased from £12,000 to £18,000 in this budget, which Healey said will exempt 70,000 businesses from business rates, equating to almost half of small businesses.
Healey also reversed his predecessor's decision to decrease the Cash ISA limit by £8,000 from £20,000 to £12,000, and announced that a new First Time Buyer ISA (FTB ISA) will replace the Lifetime ISA (LISA) that was established in 2017. The new FTB ISA will not have the same withdrawal penalties that the LISA had, with Healey pledging that what is put in, will be received back upon withdrawal, as well as maintaining the 25% government bonus on up to £4,000 of savings each year.
Healey maintained the fuel duty freeze in place for now the 16th consecutive year, saving money for motorists amid the fuel price instability instigated by the Iran War and the closure of the Strait of Hormuz (which carried approximately 20 million barrels of crude oil a day before the conflict began). Brent Crude currently sits at $113 a barrel as of writing, with the pre-war level being at around $70 a barrel. Healey also maintained the VAT cut on electricity bills, extending them to July 2027.
A tax raid on banks was announced, with the surcharge in bank profits over £100m to increase by 3pp from 3% to 6%. That 3% was initially put forward by Conservative Chancellor George Osbourne in 2015, and enacted in 2016, Labour Chancellor John Healey has now increased it, saying that this will be 'to pay for immediate support on energy bills'. This will start in January, and will last for 15 months before returning to Osbourne's 3% set rate. This instigated a bounce in the stock prices for banks, however this was only due to initial reports suggesting that the tax on banks would be worse, with a 5pp increase to 8% being forecast before Healey's speech.
Landlords were too taxed, with Healey announcing that tax rates on income from property and savings would rise by a further 2pp from April 2027. The Office for Budget Responsibility (OBR) warned that this measure would be likely to increase rents in the long term due to the decreased supply of rental properties that would be inevitable.
A message was issued directly to Moscow in Healey's speech, stating that 'Britain will stand with Ukraine for as long as it takes', and committed to an extra £10bn of support for Ukraine, before then committing to the pledge that he initially resigned as Defence Secretary over Starmer's refusal to meet, which was to ensure that defence spending would be at 3% of GDP by 2030. He also reiterated the pledge to reach the NATO goal of 3.5% of GDP being spent on defence by 2035.
