Chancellor John Healey's first budget offers British households a £100 energy payment and promises of cheaper bills through measures like abolishing standing charges on gas bills for 23 million homes. These gestures matter for families struggling with costs. But they distract from a harder truth: the government is bracing for an economy that will underperform expectations, and no amount of short-term relief can fix that.
The Office for Budget Responsibility has slashed UK growth forecasts for 2027 to just 1% annually, down from the 1.6% predicted in March. Healey blames trade tensions and the war in Iran for driving up energy costs and interest rates. Yet his budget response—a VAT cut through July worth £50 off the annual price cap, plus that one-off £100 payment to 20 million households in council tax bands A to D—treats symptoms rather than the disease. These measures will cost £2.6 billion and provide temporary relief. They will not address why the UK economy is slowing or what happens when the VAT cut expires.
More troubling is what the numbers reveal about the government's fiscal position. The UK will spend £14 billion more on debt interest this year. Government borrowing will remain at 4.2% of GDP this year before gradually declining to 1.8% by 2030-31, according to the OBR. Healey repeatedly emphasizes fiscal discipline as his first priority and claims £15 billion of headroom in 2029-30. But these forecasts assume growth will materialize as predicted. If global uncertainties worsen—which Healey himself acknowledges are "swirling worldwide"—those headroom figures evaporate.
The budget does contain some sensible decisions. Removing the cliff edge for carers' allowance stops people accumulating "debts in the thousands of pounds" through accidental overpayment. Increasing the mileage rate for working drivers from £0.25 to £0.30 a mile recognizes rising costs. Extending small business rate relief to 70,000 smaller retail, hospitality and leisure firms addresses genuine high street distress.
But these targeted interventions cannot compensate for an economy that is weakening. Healey's approval of the Jackdaw gas field and his commitment to net zero represent a pragmatic balancing act, yet neither will generate the growth his budget projections depend on. The government is essentially asking households to accept smaller bills today while betting that fiscal restraint and marginal policy tweaks will deliver stronger growth tomorrow. That is a wager the OBR's revised forecasts suggest may not pay off. Households deserve more than a £100 payment and a promise that things will improve.
Healey has made the politically necessary moves to show fiscal responsibility and provide immediate relief. What remains unclear is whether this budget addresses the deeper economic stagnation that even the government's own forecasters now predict.