Budget 2026 live: Chancellor announces £100 energy bill payment for millions of households

Chancellor John Healey’s Budget is “not good enough, not strong enough, not bold enough”, Kemi Badenoch has thundered in the Commons.

She told gathered MPs the UK remains “overspent, overborrowed, overtaxed and drowning in an out-of-control welfare system” under Labour.

Ms Badenoch did welcome the further £10bn support for Ukraine. But criticised Mr Healey for delaying his plans to increase defence spending until the spending review next year.

The Tory leader has started to respond to John Healey’s first Budget.

Political correspondent Millie Cooke reports:

The government has replaced the Lifetime ISA with a new First Time Buyer ISA and announced a new ‘Your First Home’ scheme, as part of an attempt to make it easier for people to own their first home.

John Healey told the Commons: “For every young person who’s working hard, saving what they can and dreaming of their own first home, I am taking action.

“I’m announcing that a new First Time Buyer ISA will replace the Lifetime ISA… …and from today, I am dealing with the LISA penalty. So if the home you want costs more than the limit, you will get back at least what you put in.

“And I’m going further. From next Spring, a new scheme for first time buyers who don’t have the bank of mum and dad behind them. Your First Home – an equity loan scheme, which I’m funding today with £4.7bn of government-backed lending.”

He added: “Hope starts with a home. A route off the streets. A secure home to raise your kids. The keys to your own front door. Delivered to the British People by this Labour Government.”

Whitehall editor Kate Devlin reports:

Healey also talked about previously announced plans to adjust the state pension Triple Lock by 2030.

Currently it rises every year by the highest of either average earnings growth, consumer price index (CPI) inflation and 2.5 per cent.

This has led to accusations of a ‘ratchet’ effect which pushes up the value of the state pension compared with either growth in prices or growth in average earnings.

Mr Healey said the changes would still see the pension keep pace with earnings and inflation and save £15bn per year by the end of the 2030s and £50bn by 2050.

He said this would be a “new settlement for older generations: a rising State Pension and a National Care Service that is there when older people need it, taking the burden off families and taking the burden off our NHS.”

Political correspondent Millie Cooke reports:

John Healey has attacked the Conservative Party’s record on defence spending, accusing them of having “hollowed out and underfunded our military”.

But despite his criticisms, the chancellor kicked the can down the road on plans to increase defence spending to 3 per cent of GDP, saying that will be set out at next year’s spending review.

Speaking about Britain’s military, the former defence secretary said: “The week in Kyiv started with Russia launching another brutal ballistic missile attack on the city. And 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.

“£10bn of additional economic and military support – based on loans, export finance guarantees, and half a billion in urgent military funding for this winter. The whole house, the whole country, is united for Ukraine. Today we send a clear message to Moscow: Britain will stand with Ukraine for as long as it takes.”

He added: “In this new era of threat, the demands on UK defence are rising. Keeping the British people safe by equipping our armed forces is the first duty of any government. I say this as chancellor, as a former defence secretary, and as a dad whose son is an Army reservist, who four years ago came back from training to say they had no kit or bullets to fire.”For fourteen years, Conservative governments hollowed out and underfunded our military. I am proud to be part of a Labour government that has made the biggest increase in Defence Spending since the end of the Cold War.

“This year, our Defence budget is £14bn higher than it was in the Conservative’s last year of government. At the Spending Review next year, I confirm that I will set out the details of how we will meet our NATO commitment to spend 3.5 per centof GDP on defence by 2035, with a target date for 3 per cent in 2030.”

Britain will commit £10 billion of additional economic and military support to Ukraine, and half a billion in urgent military funding this winter, John Healey said.

Political correspondent Millie Cooke reports:

John Healey has vowed to “bring down the welfare bill” in a “Labour way”, accusing the last Conservative government of “writing off a million young people”.

However, proposals to cut the welfare bill, he said, will come later this year.

The chancellor told the Commons: “When it comes to welfare, the last Conservative government left a broken system, which we are changing.”Bringing back the face-to-face assessments. Rebalancing Universal Credit so it doesn’t force people to label themselves as too sick to work. Reforming Motability, and clamping down on those living abroad from accessing a UK State Pension on the cheap.”

He added: “But there is more to do. I refuse to write off a million young people, like the last Conservative government. I refuse to see disabled people suffer the indignities of a system that has been found ‘not fit for purpose’, And I refuse to allow the burden of paying for this failing system to fall on taxpayers for decades to come.

“As the Prime Minister and I have both said, we will bring down the welfare bill, and we will do it in a Labour way.”

Madam Deputy Speaker, Alan Milburn and the Timms panel will publish their final reports next month. This government will then set out our response before the end of the year, with a White Paper and legislation to follow next year.”

Political editor David Maddox reports:

John Healey has bitten the bullet on devolution and started the process of devolving taxes to regions and localities.

It is very much in the philosophy of prime minister Andy Burnham who has made devolution his defining issue. But by handing income tax receipts to mayors and sending business rates to localities he is opening the door to tax competition.

Currently plans are unlikely to see mayors and councils cut rates but once the principle is established pressure will mount for them to be allowed to do that.

Once the door is opened then tax competition and a race to the bottom becomes a serious possibility as regions compete with one another to bring in wealth and investment.

John Healey opened his Budget statement by saying he wanted to give Britain some breathing space on the cost of living and the cost of business.

Here are the key measures announced so far:

• Around 20 million households will get £100 from the Government this winter to help with energy bills
• The cut to VAT on electricity will be extended to July, taking £50 off the annual price cap
• The 5p fuel duty cut has been extended until July 2027
• Gambling machines duty will rise from 20 per cent to 25 per cent
• Banks to face a temporary rise in surcharge, currently levied at 3 per cent on top of the 25 per cent corporation tax rate, by an extra 3 per cent
• National minimum wage and national living wage to increase by 3.9 per cent
• The tax threshold for small business rates relief for retail hospitality and leisure businesses to increase from £12,000 to £18,000.
• A First Time Buyer ISA will replace the Lifetime ISA