Chancellor John Healey Delivers Tax and Spending Plans in Budget 2026

Chancellor John Healey delivered his first financial update in Parliament, outlining government tax and spending plans following the transition of Andy Burnham to prime minister. Opening his speech, Healey stated that the budget was introduced during a period of international economic pressure and global uncertainties. According to the BBC News and The Guardian reports, the chancellor paid tribute to the fiscal discipline of Rachel Reeves and highlighted the economic drag caused by international trade tensions and the war in Iran.

Among the announced measures, approximately 20 million households in council tax bands A-D in England will receive a £100 payment to assist with rising energy bills, with equivalent funding designated for Scotland, Wales, and Northern Ireland. Standing charges on household gas bills are set to be removed and added to the unit rate instead, while a VAT cut on electricity bills will be extended from April to July. Additionally, the fuel duty freeze will continue until July, and import taxes will be eliminated on more than 100 food products, kerosene, and fertilisers.

The budget introduces several labour and welfare adjustments. The legal minimum wage is scheduled to rise by 3.9 per cent. Unpaid carers will no longer forfeit their entire Carer's Allowance when earning above £204 a week after tax, with a tapered system replacing the previous rule. Parental pay is also being expanded to self-employed fathers and parents in same-sex couples. For small businesses, the threshold at which High Street shops in England begin paying business rates will increase from £12,000 to £18,000.

Further tax modifications include a permanent 55p per mile tax-free mileage rate for work-related driving up to 10,000 miles, increasing to 35p per mile above that distance. A new tax-free allowance will be established for low-income pensioners to ensure individuals earning up to the value of the full new State Pension do not incur income tax. Conversely, the profit surcharge paid by banks will increase from 3 per cent to 6 per cent for a 15-month period beginning in January.

Detailing fiscal rules and economic projections, Healey stated that day-to-day spending will be covered by tax receipts, and government debt will decline as a percentage of gross domestic product by the third year of the forecast. Office for Budget Responsibility figures cited in the reports indicate government borrowing will reach 4.2 per cent of GDP this year, tapering down to 1.8 per cent by 2030-31. Gross domestic product growth is predicted by the OBR to reach 1.2 per cent this year and 1 per cent next year, with subsequent growth forecasted between 1.6 per cent and 1.8 per cent.