Banks and landlords pay for £100 winter handout in new budget

The UK economy faces a period of stagnant income growth and rising inflation, prompting the government to intervene with direct cash support for households. In his first budget, Chancellor John Healey announced a £100 winter payment for 20 million English families in council tax bands A through D. The measure is part of a £2.6 billion package designed to alleviate the pressure of higher energy and mortgage bills. Healey stated the funds would help people manage their expenses until spring.

The cost of the handout is covered by two new tax measures. The additional levy on bank profits doubles to 6% for a period of 15 months. Additionally, the tax rate on income earned from property and savings increases by 2 pence. Healey noted that the higher interest rates and inflation have already increased the government’s interest bill by £14 billion this year. The independent Office for Budget Responsibility (OBR) warned that household disposable income will see virtually no growth in 2027, with inflation rising to nearly 4%.

Critics argued the support was too small and poorly targeted. Ruth Curtice, chief executive of the Resolution Foundation, said the chancellor missed the mark by providing uniform support rather than focusing on the poorest. Hannah Peaker, deputy chief executive of the New Economics Foundation, suggested Healey could have been bolder in his approach. Laura Suter, director of personal finance at AJ Bell, noted that the tax on rental income could lead to higher rents or fewer landlords entering the market.

The OBR projected that real household incomes will only be 2% higher by 2030-31 than they were before the pandemic. Economic growth is expected to slow to 1% next year, a figure roughly half a percentage point lower than previous forecasts. The budget maintained Labour’s fiscal rules, with the government aiming to rebuild its buffer to £22 billion by the end of the forecast period. Healey emphasized that the government would use its reserves when necessary and rebuild them when possible.

Businesses will see some relief through a higher threshold for rates relief in retail, hospitality, and leisure sectors, which rises from £12,000 to £18,000. This change is funded by higher taxes on gambling and vape shops. The government also extended the VAT cut on electricity prices until next summer and canceled planned fuel tax increases. Energy provider EDF predicts the Ofgem price cap will rise by £466 in January, meaning household bills will increase despite the government’s intervention.

Political reactions focused on the pace of spending decisions. Conservative leader Kemi Badenoch accused the government of overspending and delaying decisions on welfare and defense. Healey indicated that welfare changes would follow reports from Alan Milburn and Sir Stephen Timms, expected next month. The budget also included measures to ease visa salary thresholds for certain industries and granted London new powers to extend the Bakerloo line. Former Greater Manchester mayor Burnham, now the Prime Minister, stated he is not considering an early general election for at least 12 months.