UK Budget 2026: Energy Payments, Debt Targets, and Growth Forecasts
Chancellor John Healey unveiled his first budget, centering on household energy relief and revised growth projections amid global economic uncertainty.
Chancellor John Healey presented his debut budget against a backdrop of what he described as swirling global economic pressures, pledging fiscal discipline while offering targeted relief to British households struggling with energy costs. The announcement outlined a series of measures designed to lower household bills and set out the government's medium-term borrowing trajectory.
The Office for Budget Responsibility confirmed the government will maintain its two core fiscal rules: covering day-to-day spending through tax receipts, and ensuring public sector net financial liabilities fall as a share of GDP by the third year of the forecast period. Fiscal headroom is projected at £15 billion in 2029-30, rising to £22 billion the following year, while government borrowing is expected to decline from 4.2% of GDP this year to 1.8% by 2030-31.
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Growth projections, however, present a mixed picture. The OBR now forecasts GDP expansion of 1.2% this year, slowing to 1% in 2026-27, before recovering to 1.8% in 2029 — a notable downgrade from the 1.6% growth the OBR had previously anticipated for 2027. National debt is expected to peak at 83.8% of GDP next year before gradually declining through the early 2030s.
On energy, Healey announced the scrapping of a levy on bills that had funded hydrogen development, the transfer of older renewable projects onto fixed-price contracts, and an extension of an existing VAT cut through to July — moves the government estimates will collectively reduce annual bills by roughly £50. Standing charges on gas bills will be abolished for approximately 23 million homes, saving two-thirds of households an average of £45 per year.
The centerpiece household measure is a £100 direct payment to the 20 million homes in council tax bands A through D, deposited straight into bank accounts at a total cost to the Treasury of £2.6 billion. Continue reading at Business | The Guardian.
