The Chancellor has announced a wide-ranging Budget aimed at easing pressure on households and businesses while laying the foundations for long-term economic growth, energy security and national resilience.
Presented against a backdrop of global economic uncertainty and rising pressure on family finances, the package combines short-term cost-of-living support with significant measures to drive investment, support innovation, strengthen national security and accelerate regional growth.
At the heart of the Budget is a commitment to provide what ministers describe as "breathing space" for working families and businesses, alongside structural reforms designed to deliver lower energy costs, improved housing affordability and increased private sector investment.
A central feature of the package is support for household energy costs.
From 2027, up to 20 million households in England within council tax Bands A-D will receive a £100 Household Energy Payment, with equivalent funding provided across the devolved nations. The government will also extend the temporary VAT reduction on electricity bills until July 2027, reducing the Ofgem annual price cap by around £50 from April 2027.
The support will be funded through a temporary rise in the Bank Corporation Tax Surcharge from 3% to 6% for 15 months before it expires in March 2028.
The government has also committed to wider energy market reforms, including scrapping plans for a levy on gas bills to fund hydrogen projects and moving towards a framework intended to reduce energy costs over the next decade.
In a move welcomed by consumer groups, ministers will ask Ofgem to abolish gas standing charges and instead incorporate costs into unit rates, giving households greater control over how much they pay.
Workers on the National Living Wage will see a notable increase from April 2027.
The rate will rise by 3.9% to £13.21 per hour, delivering an estimated £910 annual increase in gross earnings for a full-time employee.
The government has also extended parental pay eligibility to an additional 160,000 parents, including self-employed fathers and partners who were previously excluded from support.
Drivers and businesses reliant on transport will benefit from the extension of the 5p fuel duty cut for a further six months. The planned Retail Prices Index-linked increase has also been delayed until July 2027.
According to Treasury estimates, these measures will save:
- Average car drivers around £230 over the course of this Parliament.
- Large goods vehicle drivers approximately £472.
- Heavy goods vehicle operators almost £4,000.
Electric vehicle owners will also receive support through reduced charging costs at lower-powered public charging points, saving an estimated £150 annually.
The Chancellor also confirmed a permanent increase in tax-free mileage allowances, benefiting around three million employed and self-employed drivers.
Housing remains a key priority.
The government's new Your First Home Scheme is expected to help around 70,000 people onto the property ladder.
Additional measures include:
- £1.5 billion extra investment in social and affordable housing.
- Total housing capital investment exceeding £40 billion over the next decade.
- A new First Time Buyer ISA.
- Reduction of the Lifetime ISA withdrawal penalty to 20%.
- £432 million to tackle rough sleeping over the next two years.
In response to the announcement about rough sleeping, Crisis Chief Executive Matt Downie said:
“This Budget is a clear step forward in our mission to end homelessness.
“Doubling funding for the Prime Minister’s drive to end rough sleeping in England will mean more people can be supported off the streets and into lasting homes, beyond this Christmas.
“Increasing investment in rebuilding our social housing stock across England is also hugely welcome. Without enough homes to move into, people are forced to spend months and even years in unsuitable temporary accommodation. Delivering these new homes has to start rapidly, so everyone has the prospect of a safe and stable home in the near future.
“The missing piece of the puzzle is taking action to prevent people being forced into homelessness in the first place. The government must bring housing benefit back in line with the real cost of renting, so people don’t have to make the impossible choice between keeping a roof over their head and paying for life’s essentials.
“The ambition shown by this government shows us that ending homelessness is within our reach. We must – collectively – do everything we can to get there.”
The government has also eased planning-related costs by exempting smaller brownfield housing developments from Biodiversity Net Gain requirements.
The Budget delivers one of the most significant business rates interventions in recent years.
Retail, hospitality and leisure businesses in England will benefit from measures that will either freeze, reduce or completely remove business rates liabilities.
The package is expected to:
- Remove around 70,000 additional businesses from paying business rates.
- Result in half of all retail, hospitality and leisure properties paying no business rates.
- Extend support previously announced for pubs and live music venues.
The government intends to fund the package through measures including tackling tax non-compliance on online marketplaces and increasing taxation on higher-risk gambling machine games.
Meanwhile, energy-intensive industries will benefit from the new British Industrial Competitiveness Scheme, which could reduce electricity bills by up to 25% from April 2027.
The Budget also places strong emphasis on industrial growth, innovation and business investment.
Among the headline announcements:
Aerospace
A new 10-year, £2.5 billion partnership with Rolls-Royce will support next-generation aerospace technologies.
The programme is expected to support 3,300 jobs initially and potentially generate thousands more across the supply chain.
Life Sciences
More than £1 billion of public-private investment has been secured through deals with:
- Convatec in Manchester.
- Vertex Pharmaceuticals in Oxford.
- Kindeva in Loughborough.
These projects are backed by nearly £70 million in government grant funding.
Support for Founders
The Chancellor unveiled a new Founders Relief, giving eligible founders of high-growth firms a reduced 10% Capital Gains Tax rate on up to £10 million of lifetime gains.
Additional measures include:
- Tripling the trading allowance from £1,000 to £3,000.
- Simplifying access to R&D tax reliefs.
- Enhancing venture capital schemes.
- Expanding employee share schemes.
The government will also reform visa rules to attract highly skilled workers and consult on restrictions relating to non-compete clauses.
£700 Million AI Package
Artificial intelligence is another major focus.
The government announced a £700 million package aimed at both managing AI risks and capturing its economic benefits.
Funding includes:
- £120 million for the AI Security Institute.
- £40 million for a national capability to respond to emerging AI-related security incidents.
- £140 million for the Sovereign AI Unit.
- £30 million for locally led AI adoption pilots.
A new Data Centre Covenant will also seek to ensure major AI infrastructure projects deliver wider economic and community benefits.
Reflecting growing geopolitical uncertainty, the Budget significantly increases defence investment.
Measures include:
- Full funding of the £15 billion Defence Investment Plan.
- Defence spending rising to 2.7% of GDP by 2027-28.
- A target of reaching 3% of GDP by 2030 and 3.5% by 2035.
- Up to £5 billion of investment through the National Wealth Fund and British Business Bank into defence and resilience-related sectors.
The government also announced more than £10 billion of additional support for Ukraine, including military assistance and financial guarantees.
The Budget outlines what ministers describe as the largest shift of power from Westminster to local government in a generation.
Key devolution measures include:
- Income tax assignment for all mayors from 2028.
- Powers for strategic authorities to introduce an Overnight Visitor Levy.
- Ten new devolution agreements across England.
- A commitment for local and regional government eventually to retain 100% of business rates revenues.
The government expects more than 90% of England's population to be covered by a devolution deal by the end of 2028.
Zoë Billingham, Director of IPPR North, responded to the Chancellor’s announcement, saying:
”This Budget is a vote of confidence in our regional and local leaders. We’ve taken a jump ahead on devolution, but to keep up with our peers this will need to be the beginning of radical change to rewire the state.
“The government has stuck to its promise to speed up progress on fiscal devolution with commitments on devolving business rates and a share of income tax to England’s mayors. Additional regional investment through £285million of good growth funds, funding for places without a mayor, alongside £1.5billion borrowing facilities for building infrastructure backs up the government’s words with actions.
“IPPR North urges the government to ensure that income tax devolution is ambitious enough to truly make a difference in peoples’ lives. Five per cent of income tax devolved to mayors would see an additional £4billion held by mayors.
“When the devolution agenda is felt by our communities across the country we know it will have succeeded.”
The Chancellor stressed that all Budget measures are fully funded and that the government's fiscal rules remain intact.
Treasury forecasts show:
- £15 billion of fiscal headroom in 2029-30.
- Borrowing continuing to fall across the forecast period.
- Debt finishing lower at the end of the forecast than it is today.
- Investment and day-to-day spending rules remaining on track.
The government argues that the combination of targeted support, growth-focused investment and strict fiscal discipline will help deliver immediate relief while strengthening the UK's long-term economic prospects.
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