Chancellor John Healey used his first Autumn Budget to cut household energy costs and raise the bank surcharge. The Office for Budget Responsibility (OBR) forecast growth of 1% in 2027 and warned that the energy shock leaves the outlook for households and public finances highly uncertain.
John Healey delivered his first fiscal budget on Wednesday, paying for energy relief with a higher tax on banks. Markets responded broadly positively, according to CNBC.
Banks pay for household energy relief
Healey removed standing charges on household gas heating bills and extended a tax break on electricity through July 2027. He also announced £100 ($133) checks for households in the four lowest local housing tax bands, which will cost £2.6 billion.
To fund the package, the government will raise the bank surcharge by 3%, bringing it to 6%. The measure takes effect in January and ends 15 months later, and gambling businesses and vape shops will also be taxed.
Lenders took the news better than some in the sector had feared. Barclays rose 3.3%, Lloyds Banking Group gained more than 2.6% and NatWest Group climbed 2.5%. The yield on the benchmark 10-year gilt was 2 basis points lower at 5.323%.
OBR trims the 2027 growth outlook
The OBR cut its estimate for 2027 growth to 1%, while upgrading this year's growth from 1.1% to 1.2%. CNBC reported that the OBR expects the economy to grow 1.6% in 2028.
Consumers, the forecaster said, would face inflation of 3.5% this year, up from the 2% it forecast in March. It also warned that inflation was poised to reach close to 4%, according to The Guardian.
Healey left £15bn of headroom against the main fiscal rule, down from £23.6bn left by Rachel Reeves in the spring. Since the start of the invasion of Iran at the end of February, oil prices have risen from about $70 a barrel to more than $115.
Ukraine aid and defense targets
The budget included £10 billion of additional economic and military support for Ukraine. According to CNBC, Healey said: "Britain will stand with Ukraine for as long as it takes."
Healey also said he would set out at next year's Spending Review how the UK will meet its NATO commitment to spend 3.5% of GDP on defense by 2035, with a target of 3% in 2030. On AI, he announced hundreds of millions of pounds in funding for AI security and sovereignty.
Sources: CNBC, The Guardian
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