By David Milliken and Suban Abdulla
LONDON, Oct 28 (Reuters) – British finance minister John Healey announced support to help households through the “global economic storms” with subsidies for energy bills and a freeze in fuel duty for drivers in the first budget plan of Prime Minister Andy Burnham’s government.
Healey told parliament on Wednesday he would raise taxes on banks, gambling and income for savers and landlords while also tightening value-added tax rules for online marketplaces – such as Amazon and Temu – to fund the package.
Healey said the economy faced a hit from the conflict in the Gulf as well as from global trade tensions and the war in Ukraine.
“Those are the storms we face. We can’t wish them away. We must choose the course we steer through them,” he said.
Around 20 million households living in lower-valued homes would receive a £100 payment to help offset their rising energy bills, costing £2.6 billion, he said.
Healey also said he would keep a freeze on the level of fuel duty rates, extending a five-pence temporary cut introduced in 2022 until at least July.
GROWTH DOWNGRADE FOR 2027
Britain’s economy has withstood the energy price shock from the Iran war so far. But rising inflation and the prospect of higher interest rates are likely to slow the economy next year.
Gross domestic product was on course to expand by 1.2% in 2026, up only slightly from a previous forecast of 1.1% announced by the Office for Budget Responsibility in March.
The OBR now expected GDP to grow by 1.0% in 2027, down sharply from its March forecast of 1.6%, Healey said.
Economic output was seen expanding by 1.6%, 1.8% and 1.7% in 2028, 2029 and 2030 respectively. Those projections compared with the budget watchdog’s previous growth forecasts of 1.6% in 2028 and 1.5% in 2029 and in 2030.
On entering Downing Street in July, Burnham promised “the biggest changes in the last 40 years”, including a bigger role for the state in the economy.
But Healey, a former trade union official, has to tread carefully to avoid piling more bond market pressure on Burnham’s new government .
Measures announced prior to his speech in parliament included the removal of standing charges on gas bills which would bring down costs for most households.
The Treasury has also announced tariff cuts on some imported goods including gherkins and marmalade.
More than £20 billion in extra support will go to state finance institutions to spur investment in artificial intelligence, defence and green energy by the early 2030s.
Healey has said he will reduce paperwork for businesses to save them £800 million a year.
The speech is expected to include details of how the government plans to give regional mayors more control over tax revenues, part of Burnham’s devolution push.
Healey’s spending options are limited by the surge in borrowing costs in Britain and around the world since the start of the Iran war which has eaten into his margin for meeting his main target for repairing the public finances.
He said the government’s buffer for meeting its main fiscal target by the end of the decade had fallen to £15 billion from a previous £24 billion, but the government will still meet its fiscal targets despite shocks from the Iran war.
“That’s what a buffer is for. Use it when you need it. Rebuild it when you can,” Healey said.
“So, despite the global challenges, this Budget puts us on track to eliminate the current budget deficit and get Britain’s finances into the black within 3 years.”
After big tax and spending increases in the two budgets of the previous finance minister Rachel Reeves, Wednesday has been framed as a “steady as she goes” moment for Britain’s economy.
Healey’s biggest hope is for an end to the Iran war, which would lower the government’s bill for servicing £3 trillion of public debt. That was already on course to gobble up more than 10% of public spending before the war began.
Healey said debt interest in the current financial year would cost more than £14 billion.
(Writing by William Schomberg; Editing Toby Chopra)
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