Chancellor Targets Energy Bills and Carers in Modest Budget

Chancellor John Healey is preparing to deliver a budget focused on easing household costs while acknowledging the UK faces a difficult economic moment. He will present his plans on Wednesday, aiming to provide breathing room for families dealing with rising prices. The move comes as the government tries to balance immediate relief with long term fiscal stability.

The budget is expected to be modest due to stretched public finances. Healey intends to offer temporary support to poorer households before energy bills rise steeply in January. He is also expected to cancel the planned increase in fuel duty for that month. These measures aim to lower inflation and reduce pressure on the Bank of England, which is now expected to raise interest rates four times over the next year to reach 4.75%.

Healey will propose reforms to the energy market to reduce bills for all households over the longer term. Prime Minister Andy Burnham has expressed support for abolishing the gas standing charge, a fixed daily fee on all users. Removing this charge would lower costs for those who use less energy. The financial burden would shift to heavier users. Industry experts warn that investment in hydrogen and carbon capture may be cut to limit spending, potentially impacting net zero targets.

The plan includes specific adjustments for carers and workers. Healey is expected to end the carers allowance cliff edge, which currently penalizes unpaid carers for earning just a few pence over the limit. He will also increase the minimum wage by nearly 4%, though the rise for workers under 21 will be smaller. This decision follows warnings that young people are being priced out of jobs, though it has drawn criticism for deviating from earlier manifesto pledges.

To cover the cost of these measures, Healey plans to raise taxes on banks. This move could reverse previous cuts to the bank surcharge and raise over £2 billion annually. Online retailers will also be required to collect tax owed by firms selling on their platforms. The government had to pay the highest interest rate on new five year bonds since 2008 on Tuesday, with yields exceeding 5%. Healey aims to offset the hit to public finances from this higher borrowing cost.

The budget will outline a roadmap for devolving more tax revenues to local leaders. This shift moves spending power away from central government to regions and nations. While Healey confirmed a commitment to increasing defense spending, he expects to wait until next year’s spending review to set a full timetable for reaching 3% of national income by 2030. The government faces rising inflation, which hit 3.5% last month, and consumer confidence has fallen at the fastest rate since Brexit.

Opposition parties have criticized the plan for avoiding tough decisions. The Conservative shadow chief secretary to the Treasury, Richard Fuller, described public finances as being on a cliff edge. He argued that a do nothing budget fails to address a spiraling welfare bill and mounting debt. The Liberal Democrats warned against a steady approach, with deputy leader Daisy Cooper stating that families are being squeezed from all sides and basic joys have become unaffordable for many.