Simon Harvey

***The 2026 Budget - what to expect*** FISCAL HEADROOM * John Healey is expected to lower the fiscal headroom from £23bn to around £15bn after economic hit caused by Iran war * Ministers fear fresh military strikes by the US against Iran in wake of mid-terms will render OBR forecasts obsolete within days - worse is to come ENERGY BILLS *Healey will extend the warm homes discount for families on benefits, giving them another £100 off their energy bills * But households not on benefits will bear the full brunt of the rise in January, when bills are due to go up by 27% to an average of £2,192 * Gas standing charges will be scrapped next year, saving £27 on a typical bill although those with larger homes who use more energy will pay more * Healey will announce long-term plans to move more green levies off energy bills in a bid to reduce them 'for good * He's also expected to announce long-term plans to remove the link between gas prices and electricity prices FUEL DUTY * The fuel duty freeze - which was due to end in January - will be extended to help with soaring prices at the pumps BANKING TAX * The biggest 'revenue raiser' in the Budget. Healey has been lobbied to restore the 8% surcharge on corporation tax, which would raise £2bn ONLINE RETAILER TAX * Online retail giants like Amazon, eBay and Temu will be made responsible for collecting tax from retailers selling on their platforms FAMILY BUSINESSES * Thousands of high-street shops, cafes, pubs and hairdressers will no longer have to pay business rates. Move funded with online retailer tax MINIMUM WAGE * The living wage, paid by older workers, and the national minimum wage, paid by those aged 18 to 21, will increase by 3.9%. Healey has chosen to stop the huge rises in the minimum wage amid concerns it was pricing young people out of work PENSIONERS * Healey will announce plans to shield 1million pensioners from paying income tax * The state pension is due to rise by 3.9%, taking 1million people with low incomes above the income tax threshold * Healey will introduce a new tax allowance for low-income pensioners * He has also decided not to reduce the tax-free pensino lump sum DEFENCE SPENDING * Healey's immediate priority is filling £4.7bn hole in the defence investment plan. Cuts expected to departmental budgets elsewhere * He is also expected to announce additional borrowing to fund government investment vehicles, which will then be used to fund defence * But he WILL NOT set out a timeline for hitting the 3% defence spending target. That will come in the spending review next year HELP TO BUY * A revived Help to Buy scheme called Your First Home * It will offer first time buyers a 20% equity loan to help them buy a new-build home, with a minimum deposit of just 2.5% * The earnings cap will be set at £140,000 in London and £110,000 outside London RECORD TAX LEVELS * The OBR is expected to once again say that the tax burden will rise to another post-war record * It's being driven by fiscal drag. Half a million people will be dragged into paying the higher rate * The freeze - which is pencilled in for more than a decade - is effectively the single biggest tax rise in history OBR forecasts * They will highlight the huge uncertainty caused by the war in Iran. Ministers think it could make the OBR forecasts obsolete within weeks * The tax revenues underpinning the Budget assume that Rosebank will be given the go-ahead, despite Cabinet splits on the issue WHAT ISN'T IN IT * Healey has rejected calls from colleagues to increase Capital Gains Tax amid concerns that doing so would damage growth and end up reducing tax revenues * Major welfare reform will wait until after the Milburn review, which is coming after the Budget. It will require significant upfront investment in employment support * Defence spending - the big decision has been deferred until the spending review, expected in Autumn 2027