Compare John Healey’s comms with the pre-budget media blitz of previous chancellor Rachel Reeves (which resulted in a gripping row about productivity forecasts, requiring everyone to pretend they understood what fiscal headroom was). The run-up to this year’s budget was – to the entertaining chagrin of some Westminster commentators – leak-free, with the precision-controlled release of ‘everyday fixes’, such as removing tariffs from 100 food items, from baked beans to boiled sweets – a move promptly dismissed as gherkinomics by the shadow chancellor, Andrew Griffith.
But was this controlled media strategy simply because there wasn’t… that much to leak? To keep the Treasury’s deficit reduction plans on track in the face of rising government borrowing costs, Healey leaned into incremental change, rather than radical transformation, as he warned the Commons that the country was facing not light fiscal headwinds but “global economic storms”.
Indeed, after Healey finished speaking, the government’s independent forecaster, the Office for Budget Responsibility, issued a sharp downgrade to its growth forecast for 2027, warning British households face a “pretty grim picture” for living standards as Trump’s open-ended war on Iran triggers a fresh cost of living crisis. He nonetheless promised a series of fixes to help with the cost of living, including the one measure that could plausibly be described as the proverbial hat-exiting rabbit, a new £100 energy payment for millions of households. But more difficult decisions were delayed until next year’s spending review.
What were the key takeaways?
In his 56-minute speech, Healey’s major announcements included plans to:
* Give 20m households in council tax bands A to D in England a £100 household energy payment this winter, with equivalent funding for Scotland, Wales and Northern Ireland (immediately after the announcement, Andrew Sparrow over on our politics live blog discovered that gov.uk’s council tax band checker had glitched under the strain.)
* Extend the VAT cut on electricity until July 2027, which Healey says will take £50 off the annual price cap.
* Abolish standing charges, a fixed daily fee on top of usage, on gas bills – this should save two-thirds of us an average of £45 a year, and is likely to help poorer households, which use less gas, so the standing charge makes up a bigger proportion of their bill.
* Extend the 5p fuel duty cut to July 2027.
* Introduce a new Pension Tax Allowance for lower income pensioners that means they won’t be taxed on any of their state pension.
* Abolish the controversial cliff-edge rule for carers’ allowance, a scandal exposed by the Guardian last year that has plunged hundreds of thousands of unpaid carers into life-changing debt.
* Ditch plans to slash the annual cash Isa allowance, overturning the decision by his predecessor, Rachel Reeves, to cut the amount you can save in tax-free accounts from £20,000 to £12,000 a year.
* Help for the high street: small business rate relief raised from £12,000 to £18,000
* Extra economic and military support for Ukraine worth £10bn based on loans and export finance guarantees, Healey said President Zelensky had told him “you’ve made my day” when he shared the details ahead of the budget speech.
How is he paying for it?
Sticking with Labour’s pledge not to increase income tax, VAT or national insurance, Healey raised the surcharge banks pay on their profits from 3% to 6% for the next 15 months. He said this would pay for immediate support with energy bills, but campaigners and organisations like the TUC, which has been pushing for a much higher surcharge, will probably be disappointed he didn’t go further for longer. He said the support package would also be paid for by an unexpected two percentage-point income tax rise for landlords and non-Isa savers.
Healey also raised taxes on higher stakes gambling machines by 5% to 25%, and excluded adult games centres as well as vape shops from business rates relief. Other measures include a clampdown on online sellers like Amazon, eBay and Temu avoiding VAT on their platforms, and stronger compliance powers for HMRC to collect overdue tax.
What did Healey leave out?
* The National Minimum Wage is to rise by 3.9%, but Healey faces fierce criticism for not fulfilling the manifesto pledge to equalise the lower minimum wage paid to people under 21 with the rate for older workers.
* Healey rejected calls by senior Labour MPs to raise capital gains tax to the same levels as income tax after influential figures, including the former Treasury minister Jim O’Neill, warned it would harm incentives for “wealth creators”.
* The chancellor was reported to be considering lowering the threshold for Reeves’s mansion tax from £2m to £1.5m, but London MPs pushed back.
* Although government departments are facing real-term cuts, Healey made no mention of topping up their cash budgets. Paul Johnson, former director of the Institute for Fiscal Studies, suggested the real story of the budget was Labour kicking the can down the road.
What was the reaction?
“We know who we are, we know where we’re going, we can see the Britain we want to be,” Healey concluded with a flourish, before sitting down for a big hug with Andy.
But did his budget bring British voters any closer to knowing what the Burnham government stands for? Responding to Healey’s speech, Tory leader Kemi Badenoch said that most people listening would think “is that it?” And this question was being posed by critical friends of Labour too.
The chancellor was careful to acknowledge the staging posts to come – substantial reports from Alan Milburn and Stephen Timms, on Neets and Pip respectively, will be published next month and offer more detail on proposed changes to welfare spending. The spending review next spring will set out plans to meet Nato commitments on defence.
But in the interim, did Healey offer enough? As Andrew Sparrow pointed out, perhaps sensitive to the charge that there is not much radicalism to see here, both Healey and Burnham are presenting the changes to gas standing charges as the start of an ambitious reform of “our broken energy market” – while accepting that “won’t happen overnight”. Government ministers talking up the budget in the evening media rounds also pointed to the section of the budget detailing Healey’s “roadmap for fiscal devolution” as further evidence of the vision thing.
Our early analysis suggests he is at least speaking people’s language. The £100 energy payment targets the struggling middle as well as poorer households, help for local high streets will be popular – while he successfully avoided measures that might anger vocal vested interests (looking at you, Farmer Hoggett). The public is unlikely to shed a tear for gambling bosses or banks. “Nonetheless it comes with risks,” says our political correspondent Peter Walker, “particularly if the smattering of cost of living measures are not properly noticed by voters.”
Meanwhile, our Opinion panel offers mixed reactions. Rohan Sathyamoorthy points out the “outrageous” absence of real help for young people, nor any mention of the student loan crisis. While Polly Toynbee suggests we hold our nerve, and hope, the chancellor did well to choose popular targets and tell the truth about the state we’re in.
And yet again, there’s that awkward question about boldness, and where it’s got to. As my First Edition colleague Hettie puts it so well in the panel: “Small, short-term fixes and making it easier to cancel your Netflix subscription don’t equate to a political philosophy, let alone a programme capable of convincing voters that difficult trade-offs – whether on defence spending or the costs of an ageing society – will be worth it.”
The chancellor announced a series of measures to cut energy costs, including extending the VAT cut. Photograph: Alamy/PA
