Surging energy costs linked to the conflict in Iran have weakened household finances and dragged the UK's upcoming GDP growth projection down to 1%. Chancellor John Healey responded with a £100 winter fuel payment for council tax bands A through D, funded for 15 months via the bank surcharge. Meanwhile, EDF projects the regulator's energy price cap will jump to £2,189 in January, eclipsing earlier rates. Healey's broader plan aims to curb levies and prioritize affordable clean power, but decisions on shifting £15 billion in bill charges to general taxation are postponed until next year.
Key points
The Treasury is assuming funding for green hydrogen projects while barring any new levies…: The Treasury is assuming funding for green hydrogen projects while barring any new levies that fail to reduce household costs.
Future offshore wind commissions face potential slowdowns until borrowing costs decline a…: Future offshore wind commissions face potential slowdowns until borrowing costs decline and electricity grid connections are upgraded.
Plans to transfer up to £15 billion in energy levies into general taxation have been post…: Plans to transfer up to £15 billion in energy levies into general taxation have been postponed until next year's spending review.
Sources checked by our analysis pipeline: 1
Amid the myriad of small measures, virtually everything in John Healey’s budget came back to the cost of energy. The higher energy prices that have resulted from the Iran war have pushed up inflation, are eating into households’ incomes, are a drag on businesses – and are the main reason why the forecast for GDP growth next year was cut from 1.6% to just 1%.
And energy was the focus of Healey’s sole surprise in his consumer-facing policies – the £100 payment to 20m households in A-D council tax bands to help with fuel bills this winter. It will be funded, in effect, by tapping the banks for a few quid for 15 months via the bank surcharge.
But the chancellor will know that £100 won’t look generous when the bills land. Gas prices are still rising, and leading supplier EDF’s latest prediction is that the regulator’s price cap will be hiked by £466 in January, pushing the annual rate for an average household to £2,189. When Labour took office in July 2024, talking naively about taking £300 off bills…
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