John Healey Unveils Budget Amid Rising Inflation Forecasts
Chancellor John Healey introduced energy support and bank profit surcharges as the OBR downgraded UK growth forecasts due to the war in Iran.
Chancellor of the Exchequer John Healey delivered his first autumn Budget on Wednesday, introducing a support package to counter energy price spikes caused by the war in Iran and supply bottlenecks in the Strait of Hormuz. The measures include a one-off 100-pound payment for 20 million lower- and middle-income households, the removal of VAT from electricity bills, and the abolition of the standing charge on gas bills.
To fund these initiatives, Healey doubled the surcharge on bank profits to 6% for 15 months starting in January. The budget also provided tax cuts for the retail, hospitality, and leisure sectors, funded by higher gaming machine levies, and allocated 10 billion pounds in additional support for Ukraine. Healey reaffirmed a target to spend 3% of GDP on defense by 2030.
Simultaneously, the Office for Budget Responsibility revised its economic forecasts, predicting inflation will average 3.4% in 2027 and peak at 3.75% in early 2027, up from previous projections of 2%. Consequently, the OBR downgraded economic growth forecasts for next year from 1.6% to 1%. The government expects higher state borrowing and a reduction in fiscal headroom to 15 billion pounds by 2029/30 due to increased debt interest costs, while national debt now exceeds 3 trillion pounds.
