£2.6bn Winter Payment for 20m Households Funded by 6% Bank Levy and 2p Tax Rise

Chancellor John Healey told the House of Commons on Wednesday that households in council tax bands A to D in England will receive a £100 winter payment, a package costing £2.6bn and covering about 20 million households. The figure includes funding allocated to the Scottish and Welsh governments, which Healey said he hoped would run comparable schemes.

The money comes from a set of tax changes announced in the same address. The additional levy on bank profits doubles to 6% for 15 months, a smaller increase than parts of the industry had priced in. Bank shares were among the largest gainers in the FTSE 100 afterward. Rates on income from property and savings rise by 2p, a step the budget did not signal beforehand.

Healey also cancelled fuel tax increases planned by his predecessor Rachel Reeves, extended a VAT cut on electricity through next summer, and raised the business rates relief threshold for retail, hospitality and leisure firms from £12,000 to £18,000. Higher taxes on gambling and vape shops cover that change. He said the winter payment would "take the pressure off in the coldest months, and see people through to the spring" and attributed the outlook to "global economic storms", citing the war in Iran and its effect on oil and gas prices.

The Office for Budget Responsibility forecast inflation rising to almost 4%. Growth next year is put at 1%, about half a percentage point below the March projection. David Miles of the OBR called the picture "pretty grim". Real disposable incomes are projected to stand only 2% above pre-pandemic levels by 2030-31. Higher inflation and interest rates have added £14bn to the government's interest bill this year.

The OBR said Healey still meets the main fiscal rule, with £15bn of headroom by 2029-30, down from the £24bn Reeves had built in the spring. He said he would restore that buffer to £22bn by the end of the forecast period: "Use it when you need it, rebuild it when you can."

The property and savings tax rise drew criticism. The OBR said it risks "leading to a steady rise in rents" by discouraging landlords and cutting supply. Laura Suter of AJ Bell said savers face "another hefty tax rise" and that landlords could raise rents or sell. Ruth Curtice of the Resolution Foundation called the payment badly targeted, while the New Economics Foundation said Healey had shown "the right instincts but not yet the right scale".

Conservative leader Kemi Badenoch said Britain had "overspent, overborrowed and overtaxed". EDF expects the Ofgem price cap to rise by £466 in January. The Institute for Fiscal Studies' Helen Miller said the spending review in the coming year will be a "crunch point" for many departments.