Healey raises bank and landlord taxes to fund £100 winter payments as cost-of-living squeeze deepens

John Healey stood before MPs for about an hour on Wednesday and delivered his first budget as chancellor, and the headline was a £100 payment for 20 million families to help them through the winter. The money will go to every English household in council tax bands A to D. Healey said it would take the pressure off in the coldest months and see people through to the spring.

The bill for the payment is £2.6bn, and that figure includes funding for the Scottish and Welsh governments, which Healey said he hoped would use it for a similar scheme. He blamed what he called global economic storms for the outlook, pointing to the war in Iran, which is pushing up oil and gas prices. He told the Commons that people look to government at such times not to solve all their problems but to give them a bit of breathing space.

To pay for it, he doubled the additional levy banks pay on their profits to 6%. That rise will last only 15 months and was smaller than some in the industry had feared; bank shares were among the biggest risers in the FTSE 100 on Wednesday. The rest of the money comes from a 2p increase in tax rates on income from property and savings, which had not been expected. Laura Suter of AJ Bell said savers faced another hefty tax rise on their interest, and that landlords might pass the cost to tenants or sell up. The Office for Budget Responsibility warned the change risks leading to a steady rise in rents by deterring landlords and cutting supply.

The forecasts that came with the budget offered little comfort. The OBR's David Miles described a pretty grim picture for household finances, with inflation rising to almost 4%. The watchdog cut its growth forecast for next year to 1%, about half a percentage point below its March figure, and said disposable income would see virtually no growth. Even by 2030-31 it expects real household disposable income to be only 2% above its pre-Covid level. EDF predicts the Ofgem price cap will rise by £466 in January.

Critics said the package missed its target. Ruth Curtice, chief executive of the Resolution Foundation, said the chancellor had missed the mark with badly targeted support that leaves families facing a tough winter. Hannah Peaker of the New Economics Foundation said Healey had shown the right instincts but not yet the right scale. Others faulted him for not taking more from profitable banks and for hitting savers.

The package had other parts. Healey cancelled fuel tax rises planned by Rachel Reeves and extended the VAT cut on electricity, announced earlier, to next summer. For business, he raised the rates relief threshold for retail, hospitality and leisure firms from £12,000 to £18,000, funded by higher taxes on gambling and vape shops.

The speech was low-key and aimed at jittery bond markets, and Healey stressed he would keep to Labour's fiscal rules. Higher inflation and interest rates have added £14bn to the government's interest bill this year alone. The OBR said he would meet the key rule, balancing day-to-day spending with tax revenue, but with headroom of £15bn by 2029-30, down from the £24bn Reeves had built up in the spring. Healey promised to rebuild the buffer to £22bn by the end of the forecast period, saying: use it when you need it, rebuild it when you can. Bond markets appeared unruffled by the higher short-term borrowing.

Politically, the deferral of major decisions to next year's spending review led Conservative leader Kemi Badenoch to suggest Burnham was keeping his options open on an early general election; she also said Britain had been overspent, overborrowed and overtaxed. Burnham told reporters he could rule one out for at least 12 months. Healey has said he will address welfare after reports from Alan Milburn on youth unemployment and Sir Stephen Timms on disability benefits, expected next month.

Helen Miller of the Institute for Fiscal Studies warned that sticking to Reeves's tight spending plans could store up trouble, calling next year's spending review a crunch point that looks very tough for many departments. The budget also hinted at easing some migration rules, gave Sadiq Khan powers to extend the Bakerloo line, promised cross-Channel trains at Stratford International, and put money towards exploring an Olympic bid from a northern city.