Residents of about 20 million households in England will receive £100 in their bank accounts, British finance minister John Healey announced as he presented the outline of the budget in the House of Commons. The money is meant to help pay rising energy bills. He also announced a temporary increase in the tax on banks.
The finance minister said the payments are to begin in January 2027 and help people during the coldest months. “I know that at times like these, people expect the government not to solve all their problems, but to give them some breathing room,” Healey said, stressing that the difficulties result from the global situation and two wars: the U.S. against Iran and Russia against Ukraine. “We are facing these storms and we cannot simply ignore them. We have to get through them,” he said.
Many economists stress that such a “cushion” will not completely offset the blow to household budgets that will come this winter. “If someone pays £300 a month for electricity, then taking a third off the bill in one month really changes very little. The longer the energy crisis linked to the war in Iran and other conflicts in the Middle East lasts, the longer we will feel its effects in prices, and that extra £100 on the bill will not play any particular role,” Dr. David Beck, an economist and social policy expert at the University of Salford, told PAP.
To fund the aid, the finance minister announced an additional levy on banks. The surcharge on profits exceeding £100 million will be doubled, from 3% to 6%. The changes are to remain in effect for 15 months. The Treasury expects an additional £1.5 billion in revenue. “With this budget I made a choice: I am asking the banks for a little more in order to support ordinary people,” Healey said.
Whether a household receives the money depends on the amount of its council tax, a local tax that in turn depends on the valuation of the property. There are eight council tax bands, and residents of buildings in the first four bands, who pay a lower tax, will be covered.
The program applies to England because, as a result of devolution, Northern Ireland, Wales and Scotland regulate this sector themselves. The minister said he would give those nations additional funds for a possible similar program.
According to the finance minister’s announcements, the government will also raise, among other things, the gambling tax, and will require platforms such as Amazon and Temu to collect VAT from the businesses that use them to sell products.
Healey confirmed that next year the government will eliminate the fixed component of gas charges, which is meant to help 60% of households in the country save an average of £45 a year.
The minister also confirmed a doubling of spending on help for people in a homelessness crisis who are forced to sleep on the streets. Over the next two years, the government will devote an additional £432 million to this purpose.
Minimum wage to rise 3.9%
Many economists judge that the draft budget contained no surprises. “I think it was very cautious, and in some areas vague,” Dr. David Beck said. James Smith, an analyst at ING, also assessed that the statement still left many issues unexplained and that the government is deliberately putting them off until next year. “How will the government account for higher inflation in individual ministries’ budgets? How will it finance defense? Both questions remained unanswered today,” the expert said. Paul Johnson, an economist at Queen’s College, Oxford, wrote in The Times that postponing decisions is “political and economic dishonesty.”
The British economy will grow more slowly than the March forecast indicated, the independent Office for Budget Responsibility warned on Wednesday in an analysis that traditionally accompanies the budget speech. The OBR lowered its GDP growth forecast from 1.6% to 1%.
From London, Adam Dąbrowski (PAP)
