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John Healey starts by saying that his budget is “delivered at a time when global uncertainties and pressures are swirling worldwide and hitting people here at home”.

He said the administration will have a new approach to steer us through global economic storms and give people fresh hope for Britain’s future.

He said it is an honour to deliver a budget as chancellor, before paying tribute to Rachel Reeves’s fiscal discipline. She took the difficult decisions required, he said.

Trade tensions are acting as a drag on global economic growth, as is the war in Iran, he said. The UK did not want this war, and it has driven up costs for British families through higher energy costs and higher interest rates.

The UK will spend £14bn more on debt interest this year.

Fiscal discipline is his first priority as chancellor, Healey said.

Peter Walker, senior political correspondent: A very immediate précis of the main political points of his first budget, with Healey talking up “breathing space” on the cost of living and a break from the Keir Starmer era, but also a mention of the “global uncertainties” which – and he cannot say this – might make his tweaks and changes slightly moot. This is set out more explicitly with a long section on the Iran war, and a note that the UK did not seek it.

Growth and inflation forecasts

• Healey said he will meet the fiscal rule that day-to-day spending must be covered by tax receipts, and the investment rule that government debt, defined as public sector net financial liabilities, must be falling as a percentage of GDP in the third year of the forecast.

• The government will have £15bn of headroom in 2029-30 and £20bn in 2030-31, according to the Office for Budget Responsibility, the government’s forecaster.

• Government borrowing will be 4.2% of GDP this year, 3.4% next year, then 2.9%, 2.1% and 1.8% by 2030-31, the OBR said.

• Predictions of slowing growth were wrong, Healey said. The OBR said GDP will grow by 1.2% this year, 1% next year, 1.6% in 2028, 1.8% in 2029, 1.7% in 2030 and 1.6% in 2031. In March the OBR had predicted GDP growth of 1.1% in 2026, rising to 1.6% in 2027 and 2028, and dropping to 1.5% in 2029 and 2030.

• Government debt is forecast to be 83.2% of GDP this year, 83.8% next year then falling to 83.1%, 82.3% and 81.7% in the following years.

PW: A statistics-rich part of the speech which is largely for economists and MPs, but Healey is at pains to argue that the government is treating the deficit seriously, which is a key element in trying to shape reaction. This section also brings the first joke in the speech, one which is – something now almost as traditional as a freeze of fuel duty – about Liz Truss and her mini budget.

Energy costs

• Labour’s priority is cheaper energy, Healey said. He announced a series of measures to try to cut bills, including scrapping a levy on bills to fund hydrogen to lower bills and moving older renewables onto fixed-price contracts.

• Healey said the government will extend a VAT cut through the winter and spring to July, taking £50 pounds off the annual price cap.

• He confirmed the government is abolishing standing charges on gas bills for 23m homes in a move it said will save two-thirds of households an average of £45 a year.

• He said 20m households in council tax bands A to D will receive a £100 energy payment paid directly into bank accounts. It will cost £2.6bn, he said.

PW: A political balancing act from the chancellor, going from the “pragmatic, commonsense decision” to approve the Jackdaw gas field – not popular with all Labour MPs – with talk of being “unshakeably committed” to net zero and a course towards cheaper energy based on clean sources. But again the main commitment is on the cost of living, and the much-trailed plan to remove standing charges from gas bills, plus a small-to-mid-sized rabbit of a one-off £100 energy payment for smaller homes.

Wages and cost of living measures

• Fuel duty will be frozen for the 16th year in a row. Every government forecast over that time has pretended it will then rise in future years to raise more cash, only for the freeze to continue.

• Healey increases the higher mileage rate for people who use their cars for work from £0.25 to £0.30 a mile.

• Healey said he will remove import tariffs on more than 100 products, including baked beans, chocolate and gherkins, to reduce their shop prices as trailed before the budget.

• On paternity leave, self-employed fathers will be eligible for paternity leave pay for the first time.

• Healey confirmed that both the national minimum wage and the national living wage will rise by 3.9% in April. The national living wage, for over-21s, was set at £12.71 from April 2026, while the national minimum wage for people aged 18 to 20 was £10.85.

• He confirmed the removal of a “cliff edge” for carers’ allowance which left some people with debts in the thousands of pounds for accidentally claiming the benefit when they crossed an earnings threshold, in a policy trailed before the budget.

PW: A further freeze on fuel duty? Yes, yet again. The least surprising part of every recent budget.

The high street

• Healey said he will increase the threshold for small business rate relief for retail, hospitality and leisure businesses from £12,000 to £18,000, giving a tax break to 70,000 smaller firms. Adult gaming centres and vape shops will not qualify.

• On gambling, machine games duty will rise from 20% to 25% for higher stakes machines.

• Online marketplace sellers will be targeted to ensure they are unable get around VAT.

PW: The state of local high streets is a hugely common complaint among voters and MPs alike, even if the causes of their decline are many and long-term. But more help with business rates for shops and hospitality businesses will be welcome and popular, and few outside the industry will complain about paying for it through higher taxes on gambling.

Business and personal taxes

• Healey said there will be new funding from HMRC to improve compliance and stronger powers to collect overdue tax from those who “can clearly afford to pay but ignore repeated contact”.

• There will be no change on tax on income from dividends, and no change on tax to income from employment.

• Healey confirmed he will reverse his predecessor’s decision to cut the tax-free allowance on cash individual savings accounts (ISAs) from £20,000 to £12,000 a year from April.

• Healey said he celebrates the role that banks play in the UK economy, but they will pay an extra 3% on the bank surcharge for 15 months from January. In a budget characterised by relative secrecy, raising taxes on banks was one of the policies that did leak out beforehand.

PW: No big surprises here, with the bulk of the changes being technical or incremental. The one exception is the expected increase in the windfall tax on bank profits, which will be set aside to pay for measures to help with energy bills. With this comes a direct challenge from Healey to Kemi Badenoch, who speaks next: Does she back this or not?

Business growth and AI

• The government will support Rolls-Royce to develop the next generation of engines for single-aisle passenger jets in the UK.

• Healey gave an extra £20.4bn for the state-controlled national wealth fund and the British Business Bank to try to investment in growing companies.

• He will re-establish the better regulation executive to “cut outdated regulations and admin burdens on business and on workers”.

• The government will spend another £500m on AI safety and security.

• A new “British datacentre covenant” will force centres to invest in the local area and ensure local water supplies are protected, and they will get faster grid connections and the ability to generate their own electricity.

• Healey announced a series of measures for entrepreneurs, including raising the amount people can earn from a new venture tax free from £1,000 to £3,000 and new young entrepreneurs allowance, which will cover a year of living costs for young founders.

• Healey introduced a new “founders’ relief”, a 10% tax rate on lifetime gains, up to £10m, for the founders of businesses.

PW: On procurement, an interesting final detail from Healey – a new definition of “British” for suppliers who get preferential treatment “to identify the companies creating genuine wealth, genuine investment, and jobs” in the UK. And a politically-current new “covenant” on AI datacentres, the sudden arrival of which have spooked a number of MPs.

Devolution and investments across the UK

• The chancellor announced a series of smaller investments around the country. They include £10m for a new market hall in Stafford, £10m for Bristol’s Temple Quarter and £3m to help Plymouth’s young people get jobs in defence, plus £50m to upgrade the Leeds College of Building.

• Healey said there will be a “radical rewiring of the state”, including new “good growth” funds for areas with mayors and similar funding for areas without them.

• The chancellor announced a roadmap for fiscal devolution. By the end of the decade, 100% of business rates revenues will be retained locally. From next year, 20% of business rates revenues will go to mayors and from 2028, an unspecified share of income tax receipts will go to mayors as well.

• Mayors will be able to introduce overnight visitor levies to fund their local areas, Healey said.

PW: A range of mini-announcements for various projects around the country leads into one of the defining political themes of the Burnham era – devolution. Healey reels off a list of mayoral-led schemes before setting out the previously-announced plan for fiscal devolution, based on mayors keeping increasing amounts of business and income tax receipts. As ever, the unanswered question is what happens for areas that do not have mayors.

Defence and government spending

• Healey said he is fully funding the defence investment plan, including through capital prioritisation across Whitehall – cuts to other department investment plans.

• He said he will spend on AI for the civil service to save a further £600m from back-office costs.

• He announced the launch of a review of NHS productivity.

• The government will apportion £100m for a local apprenticeship service to match young people with local firms. This will be funded from savings in welfare, fraud and error.

• Healey reiterated the target of defence spending reaching 3% of GDP by 2030 on the way to 3.5% by 2035 – but details will come in next year’s spending review.

• The national wealth fund and British Business Bank will have a new focus on defence, investing as much as £5bn over the next four years.

PW: In the least surprising but also perhaps most politically tricky section of the budget, Healey promised to fully fund the defence investment plan, but the plan to reach the target of spending 3.5% of GDP on defence is left for the upcoming spending review. Expect Badenoch to focus in on this in her response.

Update: in a slightly later passage on defence, Healey offered a couple of snippets of new policy on reaching the defence spending targets, including a taskforce to examine “innovative” ways to finance it. But the big decisions are still kicked down the road to the spending review.

Welfare

• Healey said the government will bring down the welfare bill “in a Labour way”, with a white paper expected before the end of next year after reviews of youth employment from Alan Milburn and disability from Stephen Timms.

• Previously announced changes to the pension triple lock will save £15bn a year by the end of the 2030s, he said.

PW: As with defence, so with social security. Healey stresses that the government will tackle the total welfare bill and the issue of young people not in employment or training, but there is nothing in terms of policy. As we already knew, this is awaiting the Stephen Timms review into disability benefits and the second part of the Alan Milburn review into young people. Again, Badenoch will focus in on the current lack of a plan.

Housing

• Healey said the government will spend £430m to give rough sleepers a place to sleep for the rest of the parliament.

• He said there will be no major changes to building regulations for the rest of the parliament, except for safety. Biodiversity requirements will be removed from brownfield sites.

• Councils will get cheaper borrowing for housing, and no land sold to social housing providers will attract VAT.

• Healey announced a new first-time buyer ISA to replace the Lifetime ISA, and the government will allow the withdrawal of Lifetime ISA money without previous penalties.

• The chancellor said a new equity loan scheme, Your First Home, will lend £4.7bn.

PW: Another pre-trailed plan on rough sleeping, with Healey calling it “a moral mission” for himself, Andy Burnham and Labour. This isn’t entirely hyperbole, given Burnham’s efforts on the issue as Greater Manchester mayor, but as his pledge to end rough sleeping in Manchester showed, it is a tricky goal to achieve.

Ending his speech, Healey said it is a “budget for the worker, the sole trader, the parent at the school gate”.

He said he focused on raising revenue from “those who can afford to pay” while holding off on tax rises on wages or dividends. It is the banks that will give breathing space for families today, he said.

He rounded off by saying the budget will give “breathing space now, fresh hope for the future”.

PW: Well, in nearly an hour of speech we had essentially no policies which had not been trailed or announced beyond the £100 energy bills help for some households and a couple of tweaks to ISAs. This will not necessarily worry Labour MPs, who had been told to expect a low-key fiscal event, with the main decisions coming in the spending review. It nonetheless comes with risks, particularly if the smattering of cost of living measures are not properly noticed by voters. But it is also a relatively small target on which Badenoch must try to land blows.