UK raises bank surcharge to 6% to fund £100 payments for 20 million homes

Bank surcharge rises from January

The Labour government led by Andy Burnham presented its first budget on Wednesday, 28 October. The centrepiece is a higher additional tax on banks: Chancellor John Healey told MPs it will rise from 3% to 6% for 15 months starting in January. The surcharge was first set at 8% in 2016 and cut to 3% in 2023. The extra receipts are expected to total £1.5bn (about €1.79bn). The move sits in a wider package to ease the cost of living, aimed at around 20 million households ahead of winter. Shares in most London-listed banks climbed after the increase came in below what lenders had feared, with Barclays and NatWest among the gainers.

2016

8 %

2023

3 %

2027-01

6 %

Data from the article text

A £100 payment for about 20 million households

The most direct measure is a £100 payment for roughly 20 million households in England, intended to offset part of the winter rise in energy costs. It goes to homes in council tax bands A to D, the four lowest bands in England, and the money will be paid straight into bank accounts. The programme is costed at £2.6bn. Healey told the Commons that the government knows rising bills worry families and that the aim is to give them breathing room in the coldest months. Funding will also reach the devolved governments of Scotland, Wales and Northern Ireland, and Healey urged them to introduce comparable support in their areas.

Energy bills, fuel duty and VAT

Standing charges on gas bills will be scrapped for 60% of households, saving them £45 a year. Before the change, standing charges stood at £108 a year and were not linked to how much energy a household used. The change is expected to ease bills for low users while adding to costs for heavier users. Ofgem, the energy regulator, is to abolish the charges from 2027 or as soon as possible afterwards. At current prices, an average household pays £1,723 a year on energy. Fuel duty cuts are extended to the end of June, and the VAT removal on electricity bills, in force since October, will run until next summer. The budget also announced increases to the minimum wage and the state pension.

Pressures on the budget

Healey pointed to trade tensions, Russia's invasion of Ukraine and the war in the Middle East as pressures on the British economy. He praised the UK's growth, which is the fastest among G7 economies, even as energy costs and borrowing costs rise. Debt and a narrow fiscal margin limit what Labour can do, so the budget contains no sweeping changes beyond the energy measures. The government is also seeking extra revenue from gambling companies and other tax measures, without abandoning its fiscal targets. Market turbulence and the Middle East conflict weigh on the economic outlook, with energy costs among the biggest worries for British households.