The Budget also included a £100 energy support payment for millions of households and an extension of the fuel duty freeze. In an interview with BBC’s Laura Kuenssberg, Healey stated that the government has increased defence spending “by a record amount since the Cold War” and is planning to set a 3% defence spending target for 2030. When asked if these increases are affordable, Healey said for the first time that the defence investment plan has been “fully funded.” He acknowledged the “very dangerous world” and rising threats, noting that the UK must be ready for war by July 2029, in line with NATO assessments.
Conservative leader Kemi Badenoch described the Budget as “not bold enough.” In the same interview, Healey addressed the minimum wage, confirming that while 18 to 20-year-olds will see the same percentage increase as older workers, a gap will remain. Pay for 18 to 20-year-olds will rise to £11.27 an hour in 2026, compared to £13.21 for over-20s. Healey suggested Labour might abandon its previous plan to close the gap before the next election, stating, “We’ll take one step at a time.” He also committed to reducing the overall benefits bill, calling it an “economic duty” and a “moral duty,” while claiming that a million young people being out of employment, education, or training is a “national scandal.”
Analysts noted that the higher tax rates create a “sting in the tail” for savers. With inflation expected to stay high, a basic-rate saver would need a gross interest rate of 4.61% to retain the value of their money, while a higher-rate saver would need 6.25%. Experts noted that these rates are currently impossible to find on standard savings accounts. To mitigate the impact, savers are advised to utilize the Personal Savings Allowance (PSA), which allows basic-rate taxpayers to earn £1,000 and higher-rate taxpayers £500 in interest tax-free, as well as the starting rate for savings, which allows low-income earners to earn up to £5,000 in interest tax-free.
The government will set out its longer-term spending plans next year, which will include detailed plans to meet the 3% NATO defence spending target. The new savings tax rates and minimum wage changes will take effect on 6 April of the following year.
