Winter Aid Costs Billions

The cost to fund the new winter support package is £2.6bn. Chancellor John Healey announced the figure during his first budget address on Wednesday, outlining how the government will pay for a £100 payment to approximately 20 million households. The money will be raised through increased levies on the financial sector and higher taxes on landlords and savers.

The payment targets every English household in council tax bands A through D. Healey stated that the package includes funding for the Scottish and Welsh governments, with the hope that they will implement similar schemes. He described the measure as a method to "take the pressure off in the coldest months, and see people through to the spring." The budget also scrapped fuel tax increases planned by his predecessor, Rachel Reeves, and extended a previous VAT cut on electricity until next summer.

To generate the necessary revenue, Healey doubled the additional levy on bank profits to 6% for a period of 15 months. This increase was smaller than some industry analysts had predicted, leading bank shares to rise among the top performers in the FTSE 100. The chancellor also raised tax rates on income from property and savings by 2p, a change that observers had not anticipated.

Critics quickly challenged the targeting of the 2p tax rise on property and savings. David Miles of the Office for Budget Responsibility warned that the move risks "leading to a steady rise in rents" by discouraging landlords from letting out properties. Laura Suter of AJ Bell called it "another hefty tax rise" for savers, while Ruth Curtice of the Resolution Foundation argued the payment was poorly targeted. She stated that the poorest residents required more generous assistance. The New Economics Foundation noted that Healey displayed "the right instincts but not yet the right scale."

The economic forecast accompanying the budget painted a challenging picture for the coming years. Inflation is projected to reach almost 4%, while economic growth for next year is expected to be 1%, roughly half a percentage point lower than forecasts from March. Real disposable incomes will be only 2% higher by 2030-31 than levels prior to the pandemic. EDF predicts the Ofgem energy price cap will increase by £466 in January.

Higher interest rates have already added £14bn to the government's debt servicing costs this year. Despite this pressure, the Office for Budget Responsibility confirmed that Healey will meet the primary fiscal rule. The government retains £15bn in headroom by 2029-30, down from the £24bn buffer built up in the spring. Healey promised to rebuild that buffer to £22bn by the end of the forecast period, advising to "use it when you need it, rebuild it when you can."

Political opposition focused on the broader fiscal trajectory. Conservative leader Kemi Badenoch accused the government of having "overspent, overborrowed and overtaxed." She suggested that deferring decisions to the next spending review kept the door open for an early general election. Prime Minister Burnham rejected that interpretation, stating he could rule out a vote for at least 12 months. Helen Miller of the Institute for Fiscal Studies warned that the upcoming spending review would be a "crunch point" for many government departments.

The budget included smaller items for business and infrastructure. Healey raised the rates relief threshold for retail, hospitality, and leisure firms from £12,000 to £18,000, funded by higher taxes on gambling and vape shops. The announcement also hinted at looser visa salary thresholds in certain industries, granted new powers to Sadiq Khan to extend the Bakerloo line, and allocated funds to explore an Olympic bid from a northern city.