You can define this Budget by its headline feature. Most families are going to get £100 put in their bank account to help with energy bills, partly paid for by a tax rise on banks. It is eye-catching, politically savvy and modest to the point of irrelevance.
John Healey funded the handout by raising the bank surcharge from three per cent to six per cent. This was significantly less than the eight per cent we’d been expecting and would only apply for 15 months.
No wonder the banks, which had been lobbying him furiously in the months leading up to the Budget, sounded relieved. It’ll probably raise around £1.5 billion. The big four banks made £29 billion in the first six months of 2026 alone.
The £100 help with energy bills will go to those in council tax bans A to D. You could tell how effective it was because the Government website to find out your council tax band instantly crashed from the weight of traffic. It will be received by around four in five households and will cost £2.6 billion.
This is a poor mechanism to direct help. Council tax bands are hopelessly out of date, especially in London. It means that plenty of wealthy households will get help which could have been better delivered to needier families.
But politically, it is ingenuous. For years now, governments have helped the public with energy bills only to get no credit for it. The assistance was lost, unseen, as bills rose. But by making sure it shows up as a payment into a bank account, he ensures voters clock the assistance. A bit cynical? Sure. But smart politics.
The broader politics are also obvious. The whole Budget was an exercise in goodies and baddies, taking from those the public do not like and giving to those they do – namely themselves. So he went for the banks and, to a lesser extent, landlords, and gave it to working and middle class bill payers.
The same approach could be seen on the high street, with the Chancellor punishing vape shops and gambling while raising the threshold for small business rate relief from £12,000 to £18,000.
Healey did his job well. After the Budget, the BBC ran with the headline: “Healey announces £100 energy payment for millions and bank tax rises in first Budget.” The Chancellor will have smiled at that. He got precisely the coverage he wanted.
In reality, the scheme is notable for its modesty. No matter how eye-catching it is, the £100 payment will be swallowed up by rising prices, with bills set to soar by over £400 this winter. That’s the story of the Budget in general. It was highly politically, highly intelligent, and extremely modest.
It can be hard to relate this tentative steady-as-she-goes approach to the near-revolutionary rhetoric of prime minister Andy Burnham, whose every speech promises a fundamental rewiring of the British political system. There is a great yawning chasm between his promises and the reality we’re seeing in the Budget fine print.
There are two reasons for that. The first is economic and the second is about timing. Economically, Healey had to exercise caution. The British economy is showing tentative signs of recovery. He does not want to risk swinging tax rises which suck demand out of the system.
The Iran conflict has worsened inflationary pressures and debt interest rates. Bond markets are becoming increasingly wolf-like in their gaze. The US is experiencing unusual degrees of anxiety over the scale of its debt. France is being singled out for the way that its political debate over pensions bears no resemblance to the economic reality it operates under.
Since Liz Truss, Britain has paid a risk premium on its debt. That’ll happen to any country which makes a madwoman prime minister. But the IMF has recently been impressed by the British approach and in particular the hard 2030 deadline of its fiscal rules, singling it out for commendation.
In that claustrophobic situation, with danger on all sides and only very hesitant signs of improvement, Healey’s main task was to keep everything calm, orderly and boring. He managed it well. In fact, he managed it so well half the Commons Chamber seemed near asleep by the time he sat down. This was entirely to plan. There was very little reaction in the bond markets, with all different maturities staying level, a reassuring flat line without any heart attack spikes.
Incidentally, Burnham himself deserves a lot of credit for this. It is not just about the caution of the Budget, but also a reflection of the fact that he pledged to reform the pension triple lock. That was a sign to markets that Britain was willing to do electorally dangerous things in order to control public spending. The Prime Minister now enjoys the dividends of that political investment. In terms of sequencing, the basic reality is that the government is not ready to outline its agenda yet.
We know that this agenda is very radical indeed. Burnham wants to introduce a National Care Service, reform the electoral system, and open up the idea of a return to the EU. In the Budget, Healey confirmed that the UK would spend three per cent of its GDP on defence by 2030. He signalled that the upcoming Milburn review would herald a tougher approach to welfare, albeit with short-term assistance to help people into work.
The basic reality is that the Government isn’t ready yet to unveil all these projects. The welfare policy will come later, as will a major 10 year plan with all the tent-pole policies Burnham hopes to deploy over the decade to come. The Casey review into social care comes next summer. 2027 will see a brutal spending review, in which many government departments will face radical cuts. There will also be major debates on Europe and electoral reform.
The job of this Budget was therefore to keep everything steady while these plans are brought to fruition. Healey had to offer voters breathing room while making sure he didn’t upset the markets. He had to make sure that he did not do anything to unsettle things in the short term ahead of the long term agenda being unveiled.
The best way to do this was to be cautious, politically-intelligent and very boring. And that is precisely what he offered.
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