UK Chancellor Cuts Energy Costs

British Chancellor of the Exchequer John Healey announced a 100-pound one-off payment on Wednesday. The cash goes to 20 million lower- and middle-income households. Healey called the measure a way to give families breathing space this winter. The payment addresses rising costs driven by the conflict in the Gulf.

Healey took the position in July when Andy Burnham became prime minister. This was his first budget statement. He said the government did not want the Iran war. He described the situation as global economic storms. The conflict has squeezed oil and gas supplies through bottlenecks in the Strait of Hormuz. These supply issues have pushed energy prices higher.

The budget includes other energy relief. A cut in sales tax on electricity bills will extend. A charge paid on gas bills will be abolished. Healey noted that these changes aim to soften the impact on consumers. He warned that families face higher prices at the pump and higher mortgages. Businesses face higher running costs and more expensive loans.

To fund the support, Healey raised taxes on banks. He increased the surcharge on bank profits from 3% to 6%. This rate applies for 15 months starting in January. Banks have benefited from higher interest rates. Healey also raised the machine games duty in the gambling sector. These revenue sources will pay for the new household support.

The economic forecast for the United Kingdom remains mixed. Healey said the economy will grow by 1.2% in 2026. This figure is higher than previous predictions. However, inflation has risen to a near one-year high of 3.5%. Healey expects inflation to remain high for the next year or two. The Bank of England is expected to raise interest rates soon.

Rising rates increase the cost of servicing government debt. The U.K. debt total has passed 3 trillion pounds for the first time. This amount equals roughly 4 trillion dollars. The government must use 8% of its spending to service this debt. Healey stated that the U.K. will spend 14 billion pounds more on debt interest this year. The independent Office for Budget Responsibility provided these forecasts.

The budget was otherwise low-key. Healey avoided large spending increases. Bond markets are watching debt levels closely. France has faced recent protests over its financial state. Healey acknowledged the pressure from global markets. He said the storms facing the economy cannot be wished away.