Around 20 million UK households will receive a £100 payment to help cover energy costs this winter. Chancellor John Healey announced the support package in his first budget speech. The government aims to ease pressure on household budgets as energy prices remain high and economic uncertainty continues. The £2.6 billion scheme will provide direct payments to eligible households in council tax bands A to D. The money will go straight into their bank accounts. Healey said the payments would help families manage their expenses through winter and spring. The government will also provide funding to Scotland, Wales and Northern Ireland to support households in those regions.

Electricity VAT Cut Extended Until July

Healey announced an extension of the zero per cent VAT rate on electricity bills until July. The relief had been scheduled to end in March 2027. Households normally pay 5 per cent VAT on electricity bills. The extension will allow eligible consumers to continue benefiting from the reduced rate. Some reports had suggested that the government might make the VAT cut permanent. However, Healey announced only an extension. The government also plans to remove standing charges from household gas bills. These charges apply daily, regardless of how much gas a household uses. Removing them would help reduce fixed energy costs for consumers.

Fuel Duty Cut Extended Until July Next Year

The government will extend the 5p-per-litre fuel duty cut until July next year. The move aims to help motorists manage rising transport costs. Healey said continued pressure on fuel prices had influenced the decision. The conflict in the Middle East has also contributed to uncertainty in energy markets. The government will increase the higher mileage rate for people who use their cars for work from 25p to 35p per mile. This change will provide additional support to workers who depend on their vehicles for professional travel. The government will also make the increase to the standard mileage rate permanent.

UK Growth Forecast Lowered

The household support package comes as the UK faces a weaker economic outlook. The Office for Budget Responsibility (OBR) expects the economy to grow by 1.2 per cent in 2026. It forecasts growth of just 1 per cent in 2027. The revised outlook points to slower growth than many economists had expected. Continued pressure from energy prices and uncertainty in the global economy have raised concerns about Britain's economic performance. Slower growth could create further challenges for households and businesses. Families may continue to face high living costs, while businesses could experience weaker demand and rising operating expenses.

Healey Promises Fiscal Discipline

Healey said his budget would support households and businesses while maintaining control over public finances. He pledged to guide Britain through global economic challenges. The budget combines direct household payments with tax relief on electricity and fuel. It also includes plans to remove gas standing charges and increase mileage allowances for workers who drive for business. The government aims to reduce the cost-of-living burden without weakening its commitment to fiscal discipline. However, households will continue to face uncertainty as energy prices remain elevated and economic growth slows.