Budget 2026 live: Healey announces £100 energy payment for millions and rise in bank tax

Key events

Mark Rutte, the head of NATO, has welcomed John Healey’s pledge to spend 3 per cent of GDP on defence by 2030.

Posting on X, Rutte says:

Good news on the new budget from @JohnHealey_MP with a strong commitment on defence.

The UK role in transatlantic security is vital, and I welcome this move to put 🇬🇧 on a credible path towards meeting the commitment made by all NATO Allies in The Hague - to ensure we’re all investing what’s needed to remain ready & able to deter aggression and defend our freedom and security

As covered earlier, Healey told MPs that next year’s spending review will set out details of how the UK will meet the target of spending 3.5% of GDP on defence by 2035 and 3% by 2030.

'Is that it?' - Badenoch ridicules budget, claiming big decisions postponed, and Healey should have cut welfare to fund defence

Here are some of the main points from Kemi Badneoch’s response to the budget.

Badenoch dismissed the budget as minimal and underwhelming. People would think “its that it?” she said.

Most people in the country listening to his budget will be thinking to themselves, is that it? Really? Is that it? The prime minister came in promising to reverse 40 years of neoliberalism. Instead, we got 4p off gherkins.

She also said the budget did not “come close to meeting the moment”.

She criticised Healey for refusing to cut welfare to fund higher defence spending.

Unfortunately, just like every other Labour budget, the headline story is the same. More borrowing, more tax rises and surprise, surprise, more money on benefits …

Next year, under Labour, the tax burden will be the highest in our country’s history. OK. And our benefits bill is going up by tens of billions of pounds because this government has put welfare first.

We are overspent, over-borrowed, overtaxed and drowning in an out-of-control welfare system. And this is his answer. It is simply not enough, not good enough, not strong enough, not bold enough …

[Labour MPs] do not understand why it’s a problem that a quarter of all working-age adults are now claiming some form of benefits. They do not understand that if Russia launches an attack on Nato in the next three years, as the government’s own intelligence suggests, we will be at war without the means to properly defend ourselves.

She ridiculed Healey’s announcements on defence. (See 1.28pm and 1.30pm.) She said:

Yes, he has funded the defence investment plan – that is welcome. Yes, there is more support for Ukraine – that is welcome. But he said himself in June that wasn’t enough.

What he’s done is he’s given himself a bit of breathing space until next year. Instead, what we have is a plan to have a plan. I bet Putin’s really scared now.

She welcomed Healey’s decision to ignore Labour MPs saying he should increase capital gains tax, his decision to pause equalisation of the younger people’s minimum wage with the full adult rate, and the U-turn on cash Isas.

She claimed the government was postponing tough decisions because Andy Burnham wants to keep open the option of an early election. She said:

We all know why he’s delayed until tomorrow, difficult decisions he should have taken today. It is because the prime minister wants to keep the option of an early general election.

She said she would not accept Healey’s invitation to support the 3% rise in the bank surcharge. (See 1.09pm.)

OBR forecasts no real earnings growth next year

Grim news for workers – the Office for Budget Responsibility is forecasting there will be no real earnings growth in the UK in 2027.

That means inflation will devour every crumb of pay rises the average worker wins next year.

It underlines how 2027 will be a tough year, with growth forecast to fall to just 1%.

The OBR then expects that real wage growth will then recover to around 0.5% a year by 2030, as energy prices drop back. But it warns that real wage growth won’t keep pace with output per worker, as firms will focus on rebuilding their profit margins.

Another blow – the OBR has also cut its forecast for growth in teal household disposable income per person, a key measure of living standards.

It says:

Subdued real wage growth, alongside the combined effect of frozen income tax thresholds and higher nominal earnings growth, means we expect RHDI per person to fall slightly in the near term.

RHDI per person then partially recovers as the energy price shock subsides.

OBR: probability of meeting the fiscal mandate has fallen to 56%

The OBR is warning that the government is slightly less likely to keep to its fiscal rules than a year ago.

The watchdog confirms that the fiscal mandate - for the current budget to be in surplus in 2029-30 – is on track, with a margin of £15bn (as John Healey told MPs earlier).

The OBR says:

This is £7bn lower than when the fiscal rules were last formally assessed at budget 2025.

The probability of meeting the fiscal mandate is now estimated at 56 per cent, which compares to a probability of 59 per cent at budget 2025.

OBR: UK's challenging position has worsened since March

The Office for Budget Responsibility’s latest economic and fiscal outlook – the fiscal watchdog’s assessment of the budget – starts with a sobering warning that “the UK’s economic and fiscal position remains very challenging”.

The OBR cites the “repeated adverse shocks” that have led to weak growth and pushed up government borrowing.

Shocks since the 2008 global financial crisis. “including rising barriers to trade after EU exit, the pandemic, and the 2022 energy price spike”, it says.

And it warns that there have been “further adverse developments” since its March forecast, with both “interest rates and energy prices rising significantly”.

As a net importer of energy, the rise in energy prices constitutes a negative terms-of-trade shock for the UK, which pushes up on inflation and lowers real household disposable income.

This means the OBR now expects UK inflation to average 3.5% in 2027, up from 2% expected in March.

The Treasury’s budget documents are online here.

And here is the Office for Budget Responsibility’s economic and fiscal outlook report.

Gov.uk wobbles as public check out their council tax band

The government’s website seems to be creaking under the pressure as people check what council tax band they are in so they can see whether they qualify for the £100 support payment announced today.

You can check your tax band here: Check Council Tax Band.

But when we try, we get this error message:

Don’t all click at once….

Healey announces first-time buyer Isa

Healey ended by talking about housing.

He said, for people saving to buy a home, a first-time buyer Isa will replace the lifetime Isa.

He ended his speech saying:

The decision I’ve taken today will help steer Britain through and, when the storms pass, what matters is where Britain is heading – a Britain reindustrialised, a Britain with power returned to communities, threats deterred, global opportunities seized.

In our first 100 days, this Labour government has set a course for fresh hope, good growth and support for those who need it.

We know who we are. We know where we’re going. We can see the Britain we want. It’s a vision burnt into every line of this budget statement, breathing space now, fresh hope for the future, delivered to the British people by this Labour government.

Healey says extra funding to tackle rough sleeping being extended

Healey says the extra £430m being allocated to tackle rough sleeping this winter will apply every winter.

This is a moral mission for me. It’s a moral mission for the prime minister. It is a moral mission for the Labour party.

Home is the heart of all our lives. It’s the foundation in which we raise our families and build our homes. Rough sleeping is the sharp end, a symptom of a system that feels broken to too many people.

Healey gives more detail of how defence spending will go up.

First, I’m launching today a new innovative Defence Finance Taskforce to lead this work ahead of the spending review.

Second, I’m now confirming that we will commence treaty negotiations on the multilateral defence mechanism or bank with Finland, Poland and the Netherlands to boost defence investment and joint procurement across Nato allies.

Third, we will expand our defence industrial base by getting the maximum amount of private investment into defence, including through public private partnerships.

And fourth, as an immediate step, I can tell the house that the Wealth Fund and the British Business Bank will launch a new focus on defence, dual use technology and sovereign capability, deploying up to £5bn of investment and lending over the next four years.

Healey says spending review will include 'target date' for getting defence spending to 3% of GDP by 2030

Healey turns to defence.

He says:

This morning, the prime minister and I called President Zelenskyy to tell him about our commitments in the budget today. He told us, you’ve made my day.

He says there will be extra economic and military support for Ukraine worth £10bn based on loans and export finance guarantees.

He says:

At the spending review next year, I confirmed that I will set out the details of how we will meet our Nato commitment to spend 3.5% of GDP on defence by 2035, with a target date for 3% in 2030.

Healey says the Alan Milburn report and the Stephen Timms report, on Neets and Pip respectively, will be published next month.

And he confirms the triple lock is being made less generous.

Healey says he investing in civil service transformation, launching a review of NHS productivity, “reducing the double running between central and local government” and setting up a local apprenticeships service.

Healey says the government has rejected austerity.

The public services are getting an extra £40bn a year for day to day spending, he says.

Healey says he is delivering most radical act of fiscal devolution in generation

And Healey announces more powers for mayors.

In today’s budget I’m announcing new good growth funds for mayors and incubator capital for areas without mayors.

I’m announcing flexible funding to invest in local economies, boosted by a further £1.5bn of devolved loans for mayor authorities, funds that will back projects like the new Black Country metro extension led by the mayor of the West Midlands, or the urban regeneration in Gateshead …

This is unfinished business for me. As a Treasury minister in the last Labour government, I was proud to help create the regional development agencies. They delivered economic growth, local regeneration before they were axed in 2010 by the Tory Lib Dem coalition.

But there is a further step we never took – the most radical act of devolution in a generation. The devolution of tax revenues.

That is the step I take today. Alongside this budget, a roadmap for fiscal devolution. For the first time, I’m making the commitment that 100% of business rates will be retained locally by the end of the decade.

So if local leaders help businesses to start and grow, more of the rates they pay will stay in that area. Fom next year 20% of business rates revenues will go to mayors and, from 2028, a share of income tax receipts will go to mayors as well.

Also, from 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitors levy.

Taken together, these are long-term funding streams they can be used to back investment into big local infrastructure, so that more of the money that is raised locally can be invested and spent locally.

Shares in gambling companies have jumped – a sign that the City thinks John Healey has gone soft on the sector.

Today’s increase in the machine game duty from 20% to 25% for higher stakes machines is below some expectations.

Casino and bingo operator Rank’s shares are up 9%, and Entain are 6.3% higher.

Healey says changes to the Treasury’s accounting methodology will lead to more regional investment. He gives a long list of places that will benefit.

Healey announces new tax relief for people who set up successful firms

Healey announces a tax cut to help people setting up their own business.

I know starting a company means taking a risk, often leaving a secure job and build something that there’s no guarantee will work.

And I believe that when business founders take that risk, build an exceptional company, create wealth for Britain, we should recognise that success and keep those people here to invest again.

That is why today I’m announcing a founder’s relief, a brand new relief in capital gains tax, a 10% rate on lifetime gains, up to £10m for the founders of our most successful firms.