UK budget raises bank taxto offset surging energy bills

Britain’s Labour government announced plans to raise a tax on bank profits in its first budget to help support households grappling with skyrocketing energy costs, Finance Minister John Healey announced on Wednesday. The surge in energy prices, largely due to the ongoing conflict in the Middle East, is straining the nation’s finances.

Healey pledged to boost defense spending to three percent of GDP by 2030, a commitment he made as defense secretary under Prime Minister Keir Starmer. He indicated that Britain’s economy will grow slightly faster than predicted this year, before slowing sharply in 2027, influenced by the war’s aftermath. Healey said, "Fiscal discipline is my first commitment," acknowledging the pressure to reassure the bond market.

As chancellor of the exchequer, Healey committed to an immediate subsidy to help households and businesses cope with the global economic turmoil. To address the financial burden, the Labour government will double the bank tax to six percent, providing a one-off payment of £100 ($133) to 20 million households. The government will also eliminate fixed fees on gas bills and maintain a freeze on fuel duty, while adhering to the spending rules set by his predecessor, Rachel Reeves, ensuring that daily expenditures match tax receipts.

Healey estimated that GDP will grow by 1.2 percent in 2026, up from the initially projected 1.1 percent following the US-Iran war. However, he warned that GDP would decelerate to 1.0 percent in 2027, lower than the 1.6 percent growth expected in early March.