Chancellor John Healey on October 28, 2026 announced a £2.6 billion package to ease energy bills for 20 million households in council tax bands A to D, including a £100 direct payment and the scrapping of gas standing charges from 2027. Healey also introduced measures to support data centres and AI development, framing the budget as a response to global economic pressures, including the US-Iran war and rising inflation.
Key measures announced:
- Energy bill relief: Standing charges on gas bills will be removed by 2027, with fixed costs shifted to unit rates. A £100 payment will be distributed to eligible households this winter. VAT on electricity bills will be extended until July 2027, reducing the annual price cap by £50. Tariffs on over 100 grocery products will also be removed.
- Data centre incentives: A new British Data Centre Covenant will require operators to invest in local communities, create jobs, and protect water supplies in exchange for priority grid connections and permission for on-site power generation. The government also launched an AI Challenge Prize to encourage AI adoption in public services.
Economic backdrop and fiscal constraints
Healey delivered the budget amid rising borrowing costs, with the UK spending £14 billion more on debt interest this year. The Office for Budget Responsibility (OBR) forecasted GDP growth of 1.2% in 2026, down from earlier projections, citing global economic instability. The chancellor emphasized fiscal discipline, adhering to rules set by his predecessor, Rachel Reeves, while acknowledging the need for targeted support.
Defence and business support
The budget included £5.5 billion to uprate benefits by 3.5%, aligning with inflation. Fuel duty was frozen, and business rates relief was extended to hospitality, retail, and leisure sectors. However, major spending decisions on defence—including plans to meet NATO’s 3.5% of GDP target by 2035—were deferred until 2027.
Reactions and expert assessments
Consumer advocate Martin Lewis welcomed the scrapping of gas standing charges, calling it a long-overdue reform. Analysts noted the budget’s cautious approach, balancing cost-of-living relief with adherence to fiscal rules. Some critics argued the measures were incremental rather than transformative, with one commentator describing it as a ‘spoonful of honey’ amid economic challenges.
Long-term implications
The budget’s focus on energy reform and AI investment signals a shift toward long-term resilience, though critics question whether the measures go far enough to address structural issues like rising debt levels and inflationary pressures. The deferral of major defence spending decisions suggests the government is prioritizing short-term stability over ambitious reforms.