Torsten Bell, the Treasury minister, has just finished an interview on Radio 4’s PM programme. Asked about claims (like this one, assuming the MP is being sarcastic, or ours at 8.50am) that the budget did not live up to Andy Burnham’s ambitions to end 40 years of neoliberalism, Bell said he did not accept that. In many areas, the government was taking a very different approach, he argued. He said Margaret Thatcher hollowed out local government, while today’s fiscal devolution roadmap will reverse that. He also said the proposals to change the way energy pricing works (see 12.50pm) would transformative.

Here is a chart from the fiscal devolution roadmap document setting out what rules will change, and when.

MSAs are mayoral strategic authorities, and FSA are foundation strategic authorities, equivalent bodies which do not have a mayor to lead them.

A Treasury minister has dismissed as “garbage” opposition claims that the small print in the budget book shows that John Healey is actually cutting defence spending.

The budget red book says that, while £42.6bn had been set aside for MoD spending in 2027-28, that has now been revised down to £41.1bn.

The Treasury says this is because less money than expected is needed for pensions. But James Cartlidge, the shadow defence secretary, said that not allocating the unused money for other areas of defence spending was “a complete dereliction of duty from the chancellor”.

And James MacClearly, the Lib Dem defence spokesperson, made the same argument. He said:

It is disgraceful that after pitching Labour as serious on defence, Healey and [Wes] Streeting are cutting the military’s resource budget by nearly £1bn next year. This will leave our troops worse off and undermine our security.

In response, Torsten Bell, a Treasury minister, posted this on social media.

Absolute garbage - this is a technical change that happens when public sector pension contributions change. There’s no impact on defence spending power & the Tories used the same mechanism in govt. What does matter for defence spending? The chancellor, who has increased it

Today’s ‘picky bits’ budget has pushed tough decisions into next year, says Tim Sarson, head of tax policy at KPMG UK:

“When it comes to tax rises, as expected with his options limited by the 2024 manifesto, the chancellor was left with a pick and mix or ‘picky bits’ approach.

Overall the announcements today will raise £7bn per year by 2031-32 with some winners and losers including a widely trailed bank surcharge, which came in lower than expected at 3% and further taxes on the gambling sector

James Smith, ING’s developed markets economist in the UK, says the budget has left more questions than answers.

Those questions include:

How will the government account for higher inflation in departmental budgets? How will it fund defence? Both questions were left unanswered today. The government’s overall spending pot for government departments was left largely unchanged later this decade, despite a higher path for inflation and the chancellor’s reaffirmed commitment to 3% Nato spending by 2030. Implicitly, that pledge is being funded by squeezing other areas of government; the OBR’s numbers imply real-terms cuts of 2.6% a year for unprotected departments later this decade.

That almost certainly won’t happen – and this is before you take social care or any of Prime Minister Andy Burnham’s other bold policies into account.

These thorny issues have been punted into 2027, potentially in the autumn, when the government will have to unveil its long-awaited spending review.

The New Economics Foundation says the budget is a missed opportunity to bring down inflation, through more ambitious cost of living measures.

They say:

The chancellor has missed an opportunity to bring down inflation rates, according to analysis from the New Economics Foundation (NEF). The research suggests a more ambitious package of cost-of-living policies would take inflation from the OBR’s projected 3.64% to 2.88% by June 2027.

But Capital Economics say the chancellor has done enough to keep the markets on side.

Today’s UK budget announcement has proven the non-event that newly-minted Chancellor Healey had signalled in advance. While his first budget is hardly inspiring, it contrasts favourably with the initial efforts of some of his recent predecessors.

By sticking to a gradual fiscal tightening path, and to the expectations set over the past couple of months for a muddle-through budget, Healey has probably done enough to keep the Gilt market on side for now.

We think that Gilt yields will fall over the coming year as the UK’s fiscal risk premium remains contained and the Bank of England policy takes a less hawkish path than money markets discount.

The government needed to issue a ministerial direction to get UK Export Finance to approve a £3bn increase in lending for Ukraine, it emerged today. This is a procedure that happens when a civil servant judges that a decision is not justified under normal responsible public spending rules, and insists that it can only go ahead if a minister explicitly overrules the objections.

In his letter explaining the need for a ministerial direction, Tim Reid, UKEF’s chief executive, argued that this was not a core obligation for the agency (which is there to help British exporters, not to fight Russia) and that the risk of the £6.5bn not being paid back was too high.

Reid said:

UKEF has played a significant role in delivering the government’s support to Ukraine by staying on cover with £3.5bn of capacity to provide export finance, supporting strategically important transactions including the supply of nuclear fuel, reconstruction of critical infrastructure and air-defence missiles. These have supported Ukraine’s resilience at a critical time while also creating jobs and industrial capacity across the UK.

However, the financial risks associated with UKEF providing support in Ukraine remain far beyond those that we would normally be willing to accept. The probability of default and expected loss is exceptionally high …

UKEF is close to capacity against its existing £3.5bn limit. You have now asked me to consider a £3bn increase in UKEF’s cover limit, taking UKEF’s Ukraine country risk limit to £6.5bn.

In response, Jonathan Reynolds, the business secetary, said he was issuing a ministerial direction because “the United Kingdom has been steadfast in its support for Ukraine’s defence, economic resilience and long-term recovery, and I consider UKEF’s support to be an important component of that wider effort.”

Labour’s Employment Rights Act is likely to have a negative impact on the economy, the OBR says today.

This is the first time that the OBR has assessed the potential economic impacts of the ERA, which received royal assent at the end of last year.

And the fiscal watchdog has concluded the ERA will probably have a negative impact on potential output, though it isn’t making an explicit assessment today.

The OBR says:

Our analysis suggests that the ERA will likely have a negative economic impact from negative impacts on businesses, particularly through increased uncertainty, lost flexibility and higher labour related costs, which will more than offset any potential positive impact on worker productivity.

That fits with the government’s own analysis, which said the reforms could cost businesses up to £5bn a year.

Earlier John Healey got an endorsement for what he said about defence spending from Mark Rutte, the Nato secretary general. (See 2.15pm.)

George Robertson, the former Nato secretary general and the lead author of the strategic defence review, has also welcomed Healey’s defence announcements. (See 1.30pm.) He said:

John Healey is acting in the national interest – and has done exactly what he said was needed for defence in his resignation letter, by setting a headmark for 3% in 2030.”

I am strongly in favour of innovative ways of financing defence – and this is a credible route to get more into UK defence. Today’s annoucements strengthens UK leadership in Nato once again.

In his speech Healey announced an extra £10bn in economic support for Ukraine. This Treasury news release explains where that money is going. It says:

The £10bn package includes £7bn of economic support being made available over three years, including up to £5.5bn of World Bank guarantees and a £500m grant contribution to the World Bank International Development Association’s crisis facility, mobilising £1.5bn of support for Ukraine.

Alongside this, there will be a £3bn increase in UK Export Finance (UKEF) capacity for Ukraine, prioritised for military support. It will bring the total UKEF support to £6.5bn.

Business groups have given the budget a mixed reaction.

Rain Newton-Smith, chief executive of the CBI, welcomed some measures, but argued John Healey should have done more for growth. She said

On the face of it, this budget lacks the bold moves that would have made it easier for firms to invest, hire and grow.

At a time of exceptional geopolitical pressures, using some fiscal headroom to absorb genuine short-term shocks is preferable to loading additional permanent costs onto business and weakening investment.

Slowing the convergence of youth rates with the national living wage is a sensible move in face of the Neets crisis and current labour market pressures. But the chancellor could have gone further. Reducing the cost of hiring by increasing the employer NICs threshold would have given firms more space to create entry-level jobs and boost employment.

Jonathan Geldart, director general at the Institute of Directors, said his members were relieved.

Business leaders will be relieved that the chancellor’s budget included no nasty surprises, having been conditioned in previous budgets to expect the worst. We very much welcome the numerous measures intended to support British start-ups and scale-ups, such as the new Founders’ Relief, Young Entrepreneurs Allowance and EMI2 [enterprise management incentive] share incentives (as well as support for small brewers).

What might at first blush be a case of small beer today could start adding up to something promising in the future.

But Tina McKenzie, national chair of the Federation of Small Businesses (FSB), said the budget was a disappointment.

This budget should have been the moment to help small businesses with the soaring costs holding them back, and the taxes restricting job creation. Instead, they got nothing to ease sky-high energy bills and nothing to make hiring someone more affordable, while the increase in business rates relief excludes too many.

Kemi Badenoch’s reaction to the budget on behalf of the Conservative party was covered earlier, at 2.11pm. Here is some reaction from other oppostion parties.

The Lib Dem leader, Ed Davey, told MPs that John Healey should have done more to address the problems with Brexit. He said:

I do think this budget will be more defined by Labour’s red lines on Europe and the Conservatives’ Brexit red tape, rather than faster growth.

And at the root of so much of what’s gone wrong in our country – the cost of living crisis, higher taxes, broken public services, empty high streets, the lack of jobs and opportunity – at the root of all of that is the lack of economic growth.

Our economy is being held back. British business is being held back, and it’s been held back above all by the terrible damage of the Conservative Brexit deal.

Ellie Chowns, the Green party Treasury spokesperson, said the budget was lacking in ambition.

You’d have thought that, after going to the trouble of ousting the last PM, taking his job, and installing a brand-new chancellor, Andy Burnham would be keen to ensure Labour displayed a bit more ambition at today’s budget than it did under his predecessor.

Unfortunately, what Britain actually saw today was a business-as-usual budget which failed to engage with the real issues facing our country – choosing to tinker round the edges, rather than properly taxing extreme wealth and profits, making essentials genuinely and permanently affordable, or investing in our long-term climate resilience.

There was no discussion of the climate crisis in Healey’s speech today, nor any new investment in renewables and climate adaptation, despite the devastating impact of this summer’s deadly heatwaves and wildfires on our communities, public services, and economy.

Nigel Farage, the Reform UK leader, said Britain was broke. In a post on social media, he said:

These are the stats John Healey doesn’t want you to read.

Unemployment will rise to 5% in 2027.

The tax burden is going up AGAIN to the highest since WW2.

By 2031 we’ll be spending £160bn/year on debt interest alone – up £36bn/year …

We are on a fiscal knife-edge. Britain is Broke. Britain needs Reform.

Kirsty Blackman, the SNP’s economy spokesperson at Westminster, said this was not a budget for Scotland. She said:

The UK Budget shows the Labour government doesn’t get Scotland – and isn’t doing anywhere near enough to protect people from the looming cost of living emergency this winter.

This isn’t a budget that a Scottish chancellor would have delivered. Instead of providing meaningful help, it has abandoned families in the face of soaring bills and has imposed another betrayal on Scotland’s energy – with the decision to scrap Scottish carbon capture funding.

Andy Burnham promised to cut the cost of living but every major household bill has increased on his watch – and the UK budget completely fails to address the scale of the challenge families are now facing.

Ben Lake, Plaid Cymru’s economic spokeperson at Westminster, said Wales was just an afterthought in the budget.

Today’s budget was UK Labour’s opportunity to prove that Wales is more than an afterthought in Treasury decisions. Instead, it appears to have delivered the worst funding settlement for Wales in years.

After months of promises about a new relationship with Wales and a new approach from the Treasury, the question many people will be asking is – where is the ambition

The chancellor chose not to announce what Wales would receive in consequentials from this budget. Buried in the documents is around £450 million of additional funding spread over three years. That falls well short of keeping pace with inflation and risks forcing the kind of spending reductions Wales experienced during the worst years of Tory cuts.

Machine games duty (MGD) is the tax levied on slot machines found in bookmakers, casinos, bingo halls and adult gaming centres (AGCs). The chancellor faced calls to double the rate of MGD from 20% to 40%, a policy backed by one of his predecessors, Gordon Brown.

Amid fierce lobbying from gambling firms, which issued dire warnings of thousands of job cuts, Healey opted for a more modest rise to 25% today. This, he said, would bring in nearly £150m a year, “raising taxes on gambling to support good growth on every high street”.

Investors responded with relief, adding £240m to the combined stock market value of Entain (Ladbrokes/Coral), Evoke (William Hill), Rank Group (Mecca Bingo/Grosvenor Casinos) and Playtech (designer of slot machine games). Entain said the MGC hike will cost it £25m, which it expects to be able to mitigate, including by shop closures. Betfred boss Fred Done, whose family took a £30m dividend from their betting empire earlier this year, also warned that closures and job losses would follow.

The chancellor singled out AGCs, sometimes known as “slot farms” for particular attention. As well as the duty rise, they will also be excluded - along with vape shops - from business rates relief available to retail and hospitality businesses.

Andy Burnham has ruled out calling a snap general election in the next year amid ongoing speculation (including among economists and investors) that he could seek to consolidate his position.

He said he was thinking “about people” and not “my own party and its prospects”, Press Association reports.

The prime minister was asked if he would call an election in the next year as he visited a community centre in central London after the Budget.

He said:

“I don’t know how many times I’ve done this now, but yes, I can rule out calling a general election in the next 12 months.

“I have said repeatedly since coming into this job, I’m not thinking about myself. I’m not thinking about my own party and its prospects.

“I am thinking about people, and I’m thinking about what I can do to help them to have that care for people, which I spoke about on my first day in Downing Street.”

He added that he was “leading from the front” and “putting Britain on a different path”.

He said:

“We’ve got a 10-year plan to come, and that will inform the spending review next year. These are my priorities, not looking at our own internal party political advantage.”

Several City economists are suggesting that today’s budget may be teeing up an early general election.

Andrew Wishart, senior UK economist at Berenberg, suggests there is a 40% chance of a general election before the end of 2027.

He points out that this would allow Labour to discard its previous manifesto commitments not to raise taxes on working people.

Wishart says:

The big questions, about how to fund a national social care service and a £15bn increase in defence spending by 2030 remain unanswered. The government will hope that the combination of a decline in gilt yields a reduction in transfer payments to those with disabilities and efficiency savings enable them to fund their priorities without a major increase in taxes. It’s just about possible, but pretty unlikely and requires tax hikes pencilled in for the back end of the parliament to come in, potentially just before the next general election.

More ambition would require a new mandate without the manifesto constraint on tax, achieved by via a general election. We put the chances of one before the end of next year at about 40%.”

Eoin O’Callaghan, macro strategist at Wellington Management, says there is a “significant question mark” over the credibility of the projections, including the biig squeeze on departmental spending in a few year’s time.

Like last autumn’s budget they incorporate an unrealistic real term freeze in departmental spending in 2029-30, after the next election. And they now incorporate an even more challenging 3% real terms cut to next year’s departmental spending too to help offset rising interest rate and unfunded public sector pensions costs. The forecasts are also predicated on nominal growth staying relatively elevated close to 4% throughout the forecast.

“That may not concern the market for now. But it highlights how challenging the UK public finances are. How difficult the fiscal decisions ahead of this government are. And why there is a risk of early elections given the tough spending decisions ahead.”

Benjamin Jones, Invesco’s Global Head of Research, predicts speculation about an early election will continue to build:

“After two blockbuster, tax-hiking budgets, investors will welcome this more ‘steady as she goes’ package from the new Labour Chancellor. Against a backdrop of rising gilt yields and geopolitical uncertainty, Healey’s decision to limit spending increases and tax rises shows sensible caution.

His opening comments were clearly aimed to ease bond market fears. However, many of the difficult fiscal choices - such as delivering welfare savings and boosting Defence spending - have been postponed until the Spending Review next year, which will continue to fuel speculation of an early election.

John Healey announced a first-time buyer ISA in his speech. This is what the Treasury says about how it will work.

The government will introduce a new FTB ISA from April 2029. The product will replace the Lifetime ISA (LISA) for new savers and provide a 25% government bonus, paid on withdrawal, towards the purchase of a first home worth up to £450,000. The maximum value of the bonus will be capped at £20,000. Existing LISA holders will be able to continue contributing to and using their accounts under the current rules. In addition, the government will reduce the withdrawal charge for existing LISA holders who use their savings to purchase a first home above the £450,000 property price cap.

The budget included a two percentage poin rise in property income taxes. By 2028-29, this will rase more than £500m a year.

But it could lead to rents going up, the OBR says. In its report it says:

These measures collectively risk leading to a steady rise in rents through two effects. First, potential landlords are less likely to enter the market, reducing long-run rental supply, which risks a steady long-term rise in rents if demand outstrips supply – which we think is more likely than not. Second, landlords are likely to pass on more of these costs to renters in the long-run through a combination of some current landlords leaving, thereby giving more price setting power to remaining landlords, and greater long-run flexibility to raise rents. Such rises in rents would offset at least some of the reduction in the commercial viability to landlords from the measures introduced in recent years.

There’s an “achilles heel” in the budget, according to the Institute for Fiscal Studies.

In their rapid reaction to today’s statement, Helen Miller, director of IFS, points out that the fiscal pans are based on “very tight” public spending plans.

Miller says:

This was broadly the budget that many were expecting. In the face of bad economic news, the chancellor has chosen to accept higher borrowing over the next five years. There was a small set of giveaways in the next few years, paid for with even higher borrowing today and higher revenues in later years.

The chancellor’s commitment to fiscal consolidation is welcome. But it is delivery that really matters. The plan to reduce borrowing has been pushed back. The planned consolidation has an achilles heel in the form of very tight plans for public service spending. This budget has a raft of fiddly measures but very little that will move the dial on growth.

The OBR’s economic and fiscal outlook highlights how the government is planning cuts to departmental spending, down from 21.5% of GDP in 2026-27, to 20.8% in 2027- 28 before falling further to 20.0% in 2031-32.

That’s significant, as the UK’s current spending review only runs until the end of the 2028–29 financial year.

The OBR says there is a clear shortfall in spending plans:

Based on the government’s assumption for total spending over this period – after taking into account policy commitments in areas including the NHS, defence and schools – spending would have to be £11 billion higher in 2031-32 to prevent ‘unprotected’ areas of day-to-day spending from falling in real terms from 2028-29.

Assuming that protected government spending (such as defence and the NHS) continues to be protected, ‘unprotected’ departmental spending would fall by 2.6% in real terms in the final three years of the forecast, the OBR says.

The Resolution Foundation thinktank says 80% of households will qualify for the £100 energy payment. It says this is a bad way of ensuring help goes to those who need it most.

The centrepiece of the chancellor’s cost of living package is a £100 council tax rebate for those living in homes in bands A–D to help with rising energy bills this winter.

But the government has failed to learn the lesson of the last price spike – that poorly targeted energy support is wasteful.

It’s unacceptable that the government still hasn’t found a way to target help at those who need it most.

The rebate is near-universal, with 80% of households in England eligible. Yet it will still miss one-in-eight of the poorest half of families (1.4 million households) who live in higher band homes.

The OBR report says RHDI (real household disposable income – one measure of living standards) is rising at a record slow rate – less than 0.1% per decade. That means, by the end of the decade, it will be just 1% higher than its pre-Covid level, it says.

Our central forecast represents a continuation of the historically weak growth in RHDI per person since the global financial crisis. Chart 2.7 shows the rolling 10-year average annual growth in RHDI per person. This slowed significantly in the aftermath of the financial crisis, due to lower growth in productivity and real wages. Growth reached a historic low over the 10 years to 2025-26, averaging just ¼ per cent a year, and we expect it to fall further in the near term. By 2029-30, our central forecast sees growth over the prior 10 years averaging less than 0.1 per cent a year. As a result, 10 years on from the onset of the pandemic, RHDI per person would be just 1 per cent higher than its pre-pandemic level.

The chancellor’s cautious bank tax hike will raise just under £1.5bn over its 15-month run, budget forecasts show.

That’s far short of the £2bn that TUC said could be raised per year had the industry-specific bank surcharge - which is on top of basic corporation tax - been hiked back to 8% from 3%.

The budget forecasts show the surcharge hike, which is due to run from January 1 2027 to March 31 2028, will raise:

• £305m in Jan-March 2027

• £950m in 2027/28

• £220m in (lagged receipts, assumedly) for 2028/29

However, the Office for Budget Responsibility said HMT receipts would be knocked by banks reactively moving some operations out of the UK:

“Over the 15 months this is in effect, it is estimated to yield a total of £1.5 billion. This is net of an estimated £190 million reduction in receipts as some banks are assumed to move profits out of the UK in response to the higher tax rate. The size of this effect is uncertain.”

Sky News is reporting that JP Morgan will end up paying an extra £100m-£150m as a result over the 15-month period.

UBS analysis published before the budget showed that an increase to 6% would raise at least £763m per year from the four UK big banks alone (that’s Lloyds, NatWest, HSBC and Barclays).

The TUC have welcomed today’s “common sense” bank tax, even though John Healey has only raised the bank surcharge to 6%.

The TUC general secretary, Paul Nowak, said:

“As Trump’s illegal war in Iran continues to cause havoc with the global economy and drive up costs, the Prime Minister and Chancellor have started to give families and firms much-needed breathing space.

“The TUC has long called for banks to pay their fair share. At a time when millions are struggling to get by, taxing banks’ bumper profits to cut energy bills is plain common sense. The chancellor has made a good start by doubling the bank surcharge – next he should be prepared to extend it and raise it if profits remain sky high.

The outlook for real household disposable income (RHDI) in the UK is “a pretty grim picture”, Prof David Miles of the OBR has warned.

[Reminder: the OBR has cut its forecast for RHDI per person, and expects it will fall slightly in the near term.]

Speaking to reporters, Miles explains:

If you go back to just before Covid, and take that as your base, where we are right now - seven years later, is virtually no growth in per person real household disposable income.

That’s pretty unusual in the history of the UK.

To a substantial effect it is caused by higher energy costs, Miles explains, which the UK can’t avoid as it is a net energy importer.

Looking back over the last decade, Miles bemoans “it’s been a dismal period in British economic history.”

John Healey appears to have achieved an important duty for chancellors on budget day – don’t crash the bond market!

UK bond prices are slightly higher today, which has pulled down the yield (effectively the cost of borrowing) on these gilts.

30-year bond yields, for example, are down 4 basis points (0.04 of a percentage point) at 5.698%. That pulls them further away from the 28-year high over 6% hit earlier this month.

The chancellor is being rewarded for a relatively quiet budget (despite the large number of measures).

Matthew Amis, investment director at asset manager Aberdeen, says:

“The gilt market wanted dull and they got exactly that. With oil and gas prices this high and with one eye on France, a dull budget is what was needed.

All of the major obstacles presented to Chancellor Healey were avoided, as such gilts yields are slightly out-performing. Is this a gilt positive budget? Not particularly, but in the context of this year that is good enough. 2027 is going to present another fiscal challenge for Chancellor Healey, but today’s budget should provide enough to reassure gilt investors going into the final months of 2026.”

Most budgets have three or four big, headline measures – tax rises or tax cuts worth several billion pounds a year. As Sky’s Ed Conway reports, this budget was unusual, because it contained an unprecedented number of measures, but their average value was (in budget terms) minimal.

Two key snap charts on the Budget...

1) in sheer numbers of policies, it’s the “busiest” budget in modern history. 98 different scorecard measures(!)

2) BUT the average VALUE of those measures was the smallest on record. Every little helps? Or too much fiddling? Views may differ

Here are the two charts from Conway that illustrate this.

There is only one measure in the budget scorecard that will cost more than £1bn in 2026-27 (apart from extra money for the defence investment plan announced in June). That is the £100 household energy payment for people living in less expensive homes, which will cost £2.6bn.

It is also a budget that does not feature big tax rises. The increase that will attract the most media attention is the rise in the bank surcharge, but that only raises £305m this year, and £959m next year. The only tax rise in the budget that will raise more than £1bn a year is a reduction in the main rate for the writing-down allowance. It will raise just over £1bn a year by 2028-29.

The OBR report says the tax burden is forecast to “increase sharply” to a record high. It says:

In the central forecast, total public sector receipts are projected to rise as a share of GDP from 40.1 per cent of GDP (£1.2 trillion) in 2025-26 to 42.9 per cent of GDP (£1.6 trillion) in 2031-32.

Within this, as chart 4.1 shows, National Accounts taxes as a share of GDP (the ‘tax take’) are forecast to increase sharply from 36.0 per cent of GDP in 2025-26 to 37.9 per cent of GDP in 2027-28, surpassing the previous historical high, before then rising more gradually to reach a peak of 38.6 per cent of GDP at the end of the forecast period. This would be a 5.7 per cent of GDP increase on the pre-pandemic level of 32.9 per cent of GDP in 2019-20.

Mark Rutte, the head of Nato, has welcomed John Healey’s pledge to spend 3% of GDP on defence by 2030.

Posting on X, Rutte says:

Good news on the new budget from @JohnHealey_MP with a strong commitment on defence.

The UK role in transatlantic security is vital, and I welcome this move to put 🇬🇧 on a credible path towards meeting the commitment made by all NATO Allies in The Hague - to ensure we’re all investing what’s needed to remain ready & able to deter aggression and defend our freedom and security

As covered earlier, Healey told MPs that next year’s spending review would set out details of how the UK will meet the target of spending 3.5% of GDP on defence by 2035 and 3% by 2030.

Here are some of the main points from Kemi Badneoch’s response to the budget.

• Badenoch dismissed the budget as minimal and underwhelming. People would think “its that it?” she said.

Most people in the country listening to his budget will be thinking to themselves, is that it? Really? Is that it? The prime minister came in promising to reverse 40 years of neoliberalism. Instead, we got 4p off gherkins.

She also said the budget did not “come close to meeting the moment”.

• She criticised Healey for refusing to cut welfare to fund higher defence spending.

Unfortunately, just like every other Labour budget, the headline story is the same. More borrowing, more tax rises and surprise, surprise, more money on benefits …

Next year, under Labour, the tax burden will be the highest in our country’s history. OK. And our benefits bill is going up by tens of billions of pounds because this government has put welfare first.

We are overspent, over-borrowed, overtaxed and drowning in an out-of-control welfare system. And this is his answer. It is simply not enough, not good enough, not strong enough, not bold enough …

[Labour MPs] do not understand why it’s a problem that a quarter of all working-age adults are now claiming some form of benefits. They do not understand that if Russia launches an attack on Nato in the next three years, as the government’s own intelligence suggests, we will be at war without the means to properly defend ourselves.

• She ridiculed Healey’s announcements on defence. (See 1.28pm and 1.30pm.) She said:

Yes, he has funded the defence investment plan – that is welcome. Yes, there is more support for Ukraine – that is welcome. But he said himself in June that wasn’t enough.

What he’s done is he’s given himself a bit of breathing space until next year. Instead, what we have is a plan to have a plan. I bet Putin’s really scared now.

• She welcomed Healey’s decision to ignore Labour MPs saying he should increase capital gains tax, his decision to pause equalisation of the younger people’s minimum wage with the full adult rate, and the U-turn on cash Isas.

• She claimed the government was postponing tough decisions because Andy Burnham wants to keep open the option of an early election. She said:

We all know why he’s delayed until tomorrow, difficult decisions he should have taken today. It is because the prime minister wants to keep the option of an early general election.

• She said she would not accept Healey’s invitation to support the 3% rise in the bank surcharge. (See 1.09pm.)

Grim news for workers – the Office for Budget Responsibility is forecasting there will be no real earnings growth in the UK in 2027.

That means inflation will devour every crumb of pay rises the average worker wins next year.

It underlines how 2027 will be a tough year, with growth forecast to fall to just 1%.

The OBR then expects that real wage growth will then recover to around 0.5% a year by 2030, as energy prices drop back. But it warns that real wage growth won’t keep pace with output per worker, as firms will focus on rebuilding their profit margins.

Another blow – the OBR has also cut its forecast for growth in real household disposable income per person, a key measure of living standards.

It says:

Subdued real wage growth, alongside the combined effect of frozen income tax thresholds and higher nominal earnings growth, means we expect RHDI per person to fall slightly in the near term.

RHDI per person then partially recovers as the energy price shock subsides.

The OBR is warning that the government is slightly less likely to keep to its fiscal rules than a year ago.

The watchdog confirms that the fiscal mandate - for the current budget to be in surplus in 2029-30 – is on track, with a margin of £15bn (as John Healey told MPs earlier).

The OBR says:

This is £7bn lower than when the fiscal rules were last formally assessed at budget 2025.

The probability of meeting the fiscal mandate is now estimated at 56 per cent, which compares to a probability of 59 per cent at budget 2025.

The Office for Budget Responsibility’s latest economic and fiscal outlook – the fiscal watchdog’s assessment of the budget – starts with a sobering warning that “the UK’s economic and fiscal position remains very challenging”.

The OBR cites the “repeated adverse shocks” that have led to weak growth and pushed up government borrowing.

Shocks since the 2008 global financial crisis. “including rising barriers to trade after EU exit, the pandemic, and the 2022 energy price spike”, it says.

And it warns that there have been “further adverse developments” since its March forecast, with both “interest rates and energy prices rising significantly”.

As a net importer of energy, the rise in energy prices constitutes a negative terms-of-trade shock for the UK, which pushes up on inflation and lowers real household disposable income.

This means the OBR now expects UK inflation to average 3.5% in 2027, up from 2% expected in March.

The government’s website seems to be creaking under the pressure as people check what council tax band they are in so they can see whether they qualify for the £100 support payment announced today.

You can check your tax band here: Check Council Tax Band.

But when we try, we get this error message:

Don’t all click at once….

Healey ended by talking about housing.

He said, for people saving to buy a home, a first-time buyer Isa will replace the lifetime Isa.

He ended his speech saying:

The decision I’ve taken today will help steer Britain through and, when the storms pass, what matters is where Britain is heading – a Britain reindustrialised, a Britain with power returned to communities, threats deterred, global opportunities seized.

In our first 100 days, this Labour government has set a course for fresh hope, good growth and support for those who need it.

We know who we are. We know where we’re going. We can see the Britain we want. It’s a vision burnt into every line of this budget statement, breathing space now, fresh hope for the future, delivered to the British people by this Labour government.

Healey says the extra £430m being allocated to tackle rough sleeping this winter will apply every winter.

This is a moral mission for me. It’s a moral mission for the prime minister. It is a moral mission for the Labour party.

Home is the heart of all our lives. It’s the foundation in which we raise our families and build our homes. Rough sleeping is the sharp end, a symptom of a system that feels broken to too many people.

Healey turns to defence.

He says:

This morning, the prime minister and I called President Zelenskyy to tell him about our commitments in the budget today. He told us, you’ve made my day.

He says there will be extra economic and military support for Ukraine worth £10bn based on loans and export finance guarantees.

He says:

At the spending review next year, I confirmed that I will set out the details of how we will meet our Nato commitment to spend 3.5% of GDP on defence by 2035, with a target date for 3% in 2030.

And Healey announces more powers for mayors.

In today’s budget I’m announcing new good growth funds for mayors and incubator capital for areas without mayors.

I’m announcing flexible funding to invest in local economies, boosted by a further £1.5bn of devolved loans for mayor authorities, funds that will back projects like the new Black Country metro extension led by the mayor of the West Midlands, or the urban regeneration in Gateshead …

This is unfinished business for me. As a Treasury minister in the last Labour government, I was proud to help create the regional development agencies. They delivered economic growth, local regeneration before they were axed in 2010 by the Tory Lib Dem coalition.

But there is a further step we never took – the most radical act of devolution in a generation. The devolution of tax revenues.

That is the step I take today. Alongside this budget, a roadmap for fiscal devolution. For the first time, I’m making the commitment that 100% of business rates will be retained locally by the end of the decade.

So if local leaders help businesses to start and grow, more of the rates they pay will stay in that area. Fom next year 20% of business rates revenues will go to mayors and, from 2028, a share of income tax receipts will go to mayors as well.

Also, from 2028, mayors and other strategic authorities will have new powers to introduce an overnight visitors levy.

Taken together, these are long-term funding streams they can be used to back investment into big local infrastructure, so that more of the money that is raised locally can be invested and spent locally.

Healey announces a tax cut to help people setting up their own business.

I know starting a company means taking a risk, often leaving a secure job and build something that there’s no guarantee will work.

And I believe that when business founders take that risk, build an exceptional company, create wealth for Britain, we should recognise that success and keep those people here to invest again.

That is why today I’m announcing a founder’s relief, a brand new relief in capital gains tax, a 10% rate on lifetime gains, up to £10m for the founders of our most successful firms.

Healey announces a new deal for datacentres.

I’m setting out a new deal for datacentres in the UK. When the NHS uses AI to treat patients, we want that data here. When our armed forces unit use AI to keep us safe, we want that data here.

So here’s the deal.

I’m today launching a new British datacentre covenant with strict tests that datacentres must meet to invest in local communities, create local jobs and protect local water supplies.

In return, critical datacentres will get the grid connections they need and, where necessary, be allowed to build onsite generation while they wait.

Bank stocks are pushing higher, after Healey confirmed that the extra taxes on the sector will be lower than had been expected (see previous post).

Today’s decision to lift the bank surcharge by 3 percentage points (so, up from 3% to 6%, we assume) means it will not return to the 8% level at which it operated before Jeremy Hunt lowered it in 2023.

NatWest are up almost 4%, and Lloyds are 3.75% higher, adding to their earlier gains.

The City had expected higher bank taxes ever since the Guardian broke news of the plan two weeks ago.

Investors may also be relieved that the surcharge will only last 15 months, once it starts in January.

This surcharge is levied on top of corporation tax.

Campaigners for a bank tax will surely be disappointed that the chancellor hasn’t gone further.

The TUC had been pushing for a higher surcharge – suggesting 16%, or even 35%, would be appropriate.

The big four banks posted combined profits of £46bn last year after several years of high interest rates – £13bn (41%) a year higher than when rates were at near-zero in 2021, they pointed out.

Turning to banks, Healey says:

Our world leading banks make a huge contribution to this country in the tax they pay in the jobs industry and investment they support.

As chancellor, I want to say directly to our banks: I celebrate and I am grateful for the role that you play.

Amid the global economic storms, I am looking to our banks to help fund breathing space for British families.

And so banks will pay an extra 3% on the bank surcharge. This will be time limited to pay for immediate support on energy bills, starting in January, ending 15 months later.

He challenges the Tories to say if they will support this.

Healey says he is providing “greater upfront relief for new investment” and “reducing the threshold for business asset disposal relief in capital gains tax from £1m to £500,000.

He says the tax on income from property and savings will go up by two percentage points from April 2027.

And he confirms that he is scrapping the plan to reduce the Isa cash allowance.

I will not go ahead with the cut to the tax free amount that people can put into a cash Isa. The limit will stay at £20,000 per year, tax free for people of all ages to make investment more accessible.

Turning to business, Healey says to business rates

And so I’m increasing the threshold for small business rate relief for retail, hospitality and leisure businesses from £12,000 to £18,000. That means 70,000 more businesses. I’m not just cutting their rates and taking them out of paying business rates altogether. They that means half of our shops, restaurants and gyms pay no business rates at all. And for all other businesses in these sectors, I will freeze their rates in real terms so that none face and above inflation rise for the next two years.

Healey says people living in homes in council tax bands A to D will get a £100 energy payment this winter.

That will help 20m households, he says.

Let me say this to families at home. I know that with the conflict in the Middle East, rising energy bills are a real worry. I know that people look to government at times like this, not to solve all their problems, but to give them a bit of breathing space.

So today I’m taking one further step this winter.

For 20 million households in council tax bands A to D, I’m announcing a £100 energy payment for households.

Healey says the removal of VAT from electricity bills will be extended “through the winter and spring to July, taking £50 off the annual price cap”.

And there is support for business too.

For business, our new British Industrial Competitiveness Scheme will take 25% of electricity bills for 10,000 firms at the heart of British industry. It will go live in April and I confirm that we’ll make back backdated payments for energy costs this year to next year.

And he confirms standing charges are being taken off gas bills.

The latest UK growth figures presented by the chancellor show that growth remains lacklustre.

And although growth will be a little faster than forecast this year, it takes a dive in 2027, before picking up towards the end of the forecast.

Here are the new forecasts:

• 2026: 1.2%, compared with 1.1% forecast at the spring statement

• 2027: 1.0%, compared with 1.6% forecast at the spring statement

• 2028: 1.6%, matching the 1.6% forecast at the spring statement

• 2029: 1.8%, compared with 1.5% forecast at the spring statement

• 2030: 1.7%, compared with 1.5% forecast at the spring statement

Healey is now talking about energy bills.

He says clean energy costs have just been added to bills in the past.

He will stop that, he says.

For many years, under Conservative governments, policy costs were simply loaded onto household bills through levies.

Today, I am putting an end to that.

We’ll introduce a new cost control framework to drive down all aspects of energy bills.

Healey turns to borrowing figures.

As a Labour government last year we cut borrowing to its lowest level in six years from 5.1 to 4.4% of GDP.

I continue that work today.

In today’s forecast, borrowing falls to 4.2% this year, 3.4% next year, 2.9% in 2029, 2.1% in 29-30 and 1.8 in 30-31 and 31-32.

Healey says his headroom is being reduced.

The OBR confirms today that headroom against the stability rule is £15bn in 2029-30, before rising to £22bn in 2030-31.

That is what a buffer is for. Use it when you need it, rebuild it when you can.

Healey says economists talk of headwinds. But Britain is facing storms.

The war in Iran has caused turmoil, he says.

He says the government did not want the war, and ignored Kemi Badenoch’s invitation to jump in.

Inflation has gone up, oil prices have gone up, and gas prices have nearly tripled since February.

This has affected businesses, and governments. Borrowing costs are reaching levels not seen for decades, he says.

He says the OBR will say borrowing costs have risen £14bn this year.

Danny Kruger (Reform UK) asks Burnham if he confirms the budget numbers assume that the Rosebank oilfield will be allowed. (See 10.25am.)

Burnham says the Rosebank decision is a quasi-judicial decision that will be taken by the energy secretary.

But he says Kruger is right to say the use of the UK’s North Sea reserves can “accelerate” the move to a clean energy future.

[Kruger is] right in pointing to the fact that use of our reserves can support and accelerate a clean energy future. And that very much was the logic behind the decision that the government announced on Jackdaw last week.

Johanna Baxter (Lab) asks if Burnham agrees that Steve Witkoff, Donald Trump’s envoy, was wrong to call President Putin a humanitarian.

She says:

The people of my constituency looked on in horror that our closest ally could use such words for a man wanted by the international criminal court for the systematic abduction of 20,651 Ukrainian children …

So will the prime minister remind our American partners that appeasement, flattery and sanction dodging deals will only embolden Putin and risk further aggression to our Nato allies?

Burnham says Baxter is “absolutely right” in what she says about Putin. But he does not comment on Witkoff calling him a humanitarian.

Badenoch says Burnham has been using the Tory Brexit deal to remove VAT from fuel bills and to cut tariffs. She says Burnham should be saying “thank you”. She invites Labour MPs to put up their hands if they want free movement. And someone else was opposed to it. She asks if Burnham agrees with what he said at the Makerfield byelection.

Burnham says his position has not changed. And he says Badenoch said it was a mistake to leave the EU without a plan for growth. But she should have said it was a mistake to leave without a plan for migration too. That lead to the Boriswave, and it is why Labour is reforming indefinite leave to remain.

Downing Street has issued its readout from cabinet today. It says Andy Burnham told colleagues the last government’s Brexit deal was “bad for the UK”, and he restated his determination to get a closer relationship.

A No 10 spokesperson said:

The prime minister opened by setting out how he would shortly write to cabinet on the UK’s relationship with the EU. He said the Brexit deal left by the last government had been bad for the UK and had led to a harder Brexit than had been promised at the referendum. The prime minister said the deal had led to low growth and also made it harder to control immigration. He said the upcoming EU summit offered the UK the opportunity to forge a closer relationship with the EU, which was good for the British people and good for British business. He added the status quo is not good enough for our country.

Turning to the budget, the prime minister said the chancellor would shortly be on his feet in the house. He then asked the chancellor to update cabinet on the key measures in the budget.

The prime minister then asked the foreign secretary to update cabinet ahead of the Commonwealth heads of government meeting, which he and the prime minister will attend.

As Graeme Wearden is reporting on the business live blog, bank shares have gone up in response to a Bloomberg report saying the bank tax won’t be as high as the sector expected.

Graeme says:

Bloomberg are reporting that John Healey’s bank tax rise will be temporary and come in at less than 8% – less than campaigners had hoped.

That would mean that the chancellor is not fully reversing the cut to the bank surcharge introduced by Jeremy Hunt in 2023.

Reminder: This surcharge is applied to bank profits on top of corporation tax. Hunt lowered the surcharge from 8% to 3% to compensate for a rise in corporation tax.

Banks shares are rallying in response. Natwest (+2.4%), Lloyds Banking Group (+2.4%) and Barclays (+2.3%) are now among the top risers on the FTSE 100 this morning.

There is more on the business live blog.

Despite some confusing messaging, John Healey is not expected to set out precise details today of how the UK might raise defence spending to 3% of GDP by 2030. This is despite the fact he resigned as defence secretary when Keir Starmer was PM because Starmer’s defence investment plan did not commit to 3% by 2030.

In an interview with the Sun, Volodymyr Zelenskyy, the Ukrainian president, urges Healey to go faster on raising defence spending. He says:

Can the United Kingdom trust Russia or not? If not, defence needs to be 100 per cent the priority.

My advice to John is don’t delay. Sorry John … but it’s important to be direct.

Today Kiran Stacey and Pippa Crerar report that the giant Rosebank oilfield can be approved without breaching the UK’s emission targets. They also reveal that, if the government were to block Rosebank (which is far more controversial with environmentalists than the Jackdaw gasfield approved last week), the Treasury would lose up to £500m a year in tax revenue – money which is already included in the government’s fiscal planning assumptions.

There may be more on this in the budget documents published this afternoon.

For the Green leader, Zack Polanski, this is one of the most important revelations of the day. In response, he said:

Today’s budget looks like being worse for our future and the young than even anything Starmer came up with.

A budget based on approval of mass new oil drilling is a betrayal of our future.

Martin Lewis said that, when he met John Healey this morning, the chancellor said that, having removed standing charges from gas bills, he would also like to get rid of them from electricity bills. Lewis said:

The chancellor said he will be talking to Ofgem about how they get rid of the charge on electricity as well, but that is ‘trickier’ apparently and will take longer.

The Financial Times is reporting this morning that John Healey will “use his budget to scrap controversial plans to slash the annual cash Isa allowance from £20,000 to £12,000, after concluding it was the wrong way to persuade people to invest more in stocks and shares”.

Most people in the City work on the basis that, if the FT is reporting a budget story on the day it is being delivered, it is safe to believe it is true. Investment companies have welcomed the news.

Simon Harrington, head of public affairs at PIMFA, a financial management company, said:

We welcome John Healey’s decision to reverse his predecessor’s controversial plans to slash the annual cash ISA allowance from £20,000 to £12,000. We have consistently argued that cutting the allowance was unlikely to achieve the government’s ambition of encouraging more people to invest, and risked making the stocks and shares ISA – the very wrapper it wants people to use – less attractive.

And Will Stevens, a partner at Killik & Co, a wealth management company, said:

The decision to retain the full Cash ISA allowance is a sensible one. Whilst there is a legitimate policy objective in encouraging more people to invest for long-term growth, reducing the allowance risked being perceived as penalising sensible saving behaviour rather than promoting investing.

The Conservatives have dismissed the chancellor’s decision to get rid of standing charges from energy bills just “sleight of hand”. In an interview on GB News, Richard Fuller, the shadow chief secretary to the Treasury, said:

We know there’s a problem with energy prices coming down the track. That’s why the Conservatives last year actually announced that cheap energy plan to get rid of VAT on people’s energy bills and roll back some of the net zero taxes that burden people’s bills.

But what Labour is doing is really sleight of hand. They’re moving it from one aspect of your energy bill or your taxes, and putting it somewhere else. Under the Conservatives, of course, we would make the tougher decisions on public spending, so the actual energy bills and people’s taxes would be coming down.

The Green party has put out this response to the news that gas standing charges will be abolished. A spokesperson said:

Abolishing standing charges is more tinkering from a government that is failing to take the bold action needed to end the cost of living crisis.

Energy bills have skyrocketed in recent years and are set to rise by hundreds of pounds again this winter.

‘Hope’ is an easy thing to promise but will not be delivered by a business-as-usual budget.

John Healey found time to hold a meeting with Martin Lewis, the founder of MoneySavingExpert.com, in Downing Street this morning. Lewis is one of the most trusted voices on personal finance in Britain, and he has been campaigning for standing charges to be removed from gas bills for some time.

Speaking to the media afterwards, Lewis said Healey was in a good mood. He said he asked the chancellor if there would be a support scheme to help people with energy bills from January, when costs are set to rise sharply. Lewis said Healey would not confirm anything, but he said that “reading between the lines” he gathered that there will be an announcement on this. Lewis speculated that this could be an increase in the warm homes discount, or it could be help for people in lower council tax bands.

Lewis said:

The biggest issue in energy right now is that we’re expecting a 27% rise in the price cap in January. I asked the Chancellor whether he will be intervening on that. He told me I’d have to wait for the budget, but reading between the lines, yes, there will be an announcement today.

Whether it’s an increase in the Warm Home Discount, or whether it’s council tax band, or whether it’s done via a payout for people in say council tax bands A-D as a proxy for household income as Rishi Sunak did who knows.

Good morning. When Andy Burnham became PM, he signalled that he wanted to end 40 years of neoliberalism. Judging by all the briefing about what will be in the budget today, neoliberalism is probably safe for another year or so because Burnham and his chancellor, John Healey, have decided not to use this as a moment for big, transformative change, but to instead opt for a more low-risk, every-little-bit-helps fiscal statement. There are radical elements in the Burnham agenda, but mostly they will have to wait for another day. In a video setting the scene for the budget, Healey sums it up with the slogan: “Breathing space today, and fresh hope for the future.”

Here is Pippa Crerar and Heather Stewart’s overnight splash story previewing the budget.

And here is an analysis by Phillip Inman setting out the main items we are expecting.

Every chancellor, though, likes to have at least one big surprise for the speech. This is the headline they want for tomorrow’s papers. We don’t know yet what Healey has chosen, but there is a lot of speculation that it will involve energy bills.

We have already had an announcement from the Treasury at 7am this morning about standing charges being removed from gas bills. Julia Kollewe has the story here.

According to the Treasury, this could save around 60% of families around £45 a year. It says:

The chancellor will announce today an end to this unfair and outdated practice. He will ask Ofgem to deliver removal of these charges – which are £108 a year for the typical household on average – in 2027 or as soon as possible after.

Instead, these fixed costs will be paid on the unit rate, which could save 60% of account-holding households around an average of £45 off their annual bill.

While this might sound like a modest cost of living measure – almost an “everyday fix” – Burnham and Healey – perhaps sensitive to the charge that there is not much radicalism in the budget – are presenting this as the start of something more ambitious. In a statement this morning, Burnham said this shows he’s “determined to reform our broken energy market” and Healey says:

My budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.

Healey is speaking at 12.30pm. We have also got PMQs today, but I will mostly be focusing on the budget, with reaction and analysis, and Graeme Wearden, who writes the Guardian’s business live blog, will be joining too to provide added firepower.

And we will also have comments open below the line (BTL).

Here is the agenda for the day.

8.45am: Andy Burnham chairs cabinet, where John Healey, the chancellor, will brief ministers on what’s in the budget.

Noon: Burnham faces Kemi Badenoch at PMQs.

12.30pm: Healey delivers the budget.

Around 1.30pm: After Healey finishes, Kemi Badenoch gives a speech responding to the budget. Other MPs respond as the budget debate continues through the afternoon.

2.30pm: Jonathan Haskel, chair of the Office for Budget Responsibility, holds a press conference.

3.30pm: Nigel Farage, the Reform UK leader, and Robert Jenrick, his Treasury spokesperson, hold a press conference to give their reaction to the budget.

If you want to get in touch, you can post a comment BTL and, if it’s addressed to Andrew, I may find it using a word search. But I am more likely to see it if you email politics.live@theguardian.com.