Healey Tax Hikes on Banks and Landlords to Fund £100 Winter Payment

John Healey raised taxes on banks and landlords to fund a £100 winter handout for 20 million families, a move designed to offset soaring energy bills during the cost of living crisis. The Chancellor introduced the measure in his first budget, citing global economic storms and the war in Iran as primary drivers of rising oil and gas prices. The payment will be sent to all English households in council tax bands A and D, with the total cost of the package reaching £2.6 billion.

Healey stated that the funds would help people breathe through the coldest months until spring. The budget includes funding for the Scottish and Welsh governments, which the Chancellor hopes they will use to implement similar schemes. He acknowledged that rising energy bills were a real worry for many, noting that the government aims to provide breathing space rather than solve all problems.

The independent Office for Budget Responsibility warned that households face a grim picture on living standards. The forecaster slashed the outlook for the economy in 2027, predicting virtually no growth in disposable income. Inflation is set to rise to almost 4%, while real disposable household incomes are expected to be only 2% higher than pre-pandemic levels by 2030. The OBR also projected anaemic economic growth of 1% next year, down by half a percentage point from March expectations.

To fund the household support, Healey doubled the additional levy banks pay on their profits to 6%. This tax increase will last for 15 months. Banks also faced an unexpected 2p increase in tax rates for income earned on property or savings. The OBR cautioned that this move risks leading to a steady rise in rents by deterring landlords from the market and reducing supply. Ruth Curtice of the Resolution Foundation criticized the handout as badly targeted, arguing that more generous support should have gone to the poorest consumers.

The Chancellor cancelled fuel tax rises planned by his predecessor and extended the VAT cut on electricity prices to next summer. Business costs were also addressed by raising the rates relief threshold from £12,000 to £18,000 for retail, hospitality, and leisure companies. This change is funded by higher taxes on gambling and vape shops. Laura Suter of AJ Bell noted that savers would be hit with another hefty tax rise, adding to the squeeze on their savings over the past few years.

Healey promised to stick to Labour’s fiscal rules despite higher inflation and interest rates increasing the government’s interest bill by £14 billion this year. The OBR stated that the Chancellor would meet the rule to balance day-to-day spending with tax revenues, but with a diminished headroom of £15 billion by 2029. This is lower than the £24 billion buffer built in the spring. The Chancellor indicated he would rebuild the buffer to £22 billion by the end of the five-year forecast period.

Conservative leader Kemi Badenoch argued that the government had overspent, overborrowed, and overtaxed. She criticized Healey for delaying decisions on defense spending and welfare cuts. Helen Miller of the Institute for Fiscal Studies warned that sticking to tight spending plans could store up trouble for next year’s spending review. She said that spending choices would be much harder than those made earlier in the current parliament due to higher inflation forecasts.