John Healey, the UK Chancellor, announced his first budget with a focus on energy costs and fiscal discipline.
Healey confirmed the government will meet its fiscal rules: day-to-day spending covered by tax receipts, and government debt falling as a percentage of GDP in the third year of the forecast. The Office for Budget Responsibility projects the government will have £15bn of headroom in 2029-30 and £22bn in 2030-31.
Government borrowing will fall from 4.2% of GDP this year to 1.8% by 2030-31, the OBR says.
The OBR revised growth forecasts downward from March predictions. It now forecasts GDP growth of 1.2% this year, 1% next year, then 1.6%, 1.8%, 1.7% and 1.6% in subsequent years. In March, the OBR had predicted 1.1% growth for this year and 1.6% for 2027 and 2028.
Government debt is forecast at 83.2% of GDP this year, peaking at 83.8% next year before falling to 81.7% by 2030-31.
On energy, Healey announced scrapping a levy on bills to fund hydrogen, moving older renewables onto fixed-price contracts, and extending a VAT cut through July that will reduce the annual price cap by £50. He confirmed abolishing standing charges on gas bills for 23m homes, saving two-thirds of households an average of £45 annually. Twenty million households in council tax bands A to D will receive a £100 energy payment at a cost of £2.6bn.