Budget 2026: Breathing space for Scottish families and businesses?

Energy costs lowered as home heating oil tariffs removed and 0% VAT on household electricity extended.
Growth backed with investments in Glasgow and Edinburgh.
The Scottish Government will have an additional £600 million for public services.

Families and businesses in Scotland will get breathing space from action announced in Budget 2026.

Against a backdrop of global uncertainty, rising energy costs and pressure on household finances, Chancellor John Healey has taken action on the cost of living, fuel prices, and local jobs — alongside more funding for the Scottish Government to provide public services.

In the Budget, John Healey announced:

Support with energy bills: The removal of the 4% tariff on kerosene will support the 142,000 Scottish households that rely on heating oil. The UK government will extend 0% VAT on household electricity bills for three months, to 30 June 2027, while a Debt Relief Scheme will write off crisis-era debt for eligible households.
Fuel: the extension of the 5p cut to fuel duty for a further six months until 30 June 2027. The 3.7p cut to red diesel duty continues, which matters for farmers, rural hauliers and other fuel-heavy users across Scotland. He also announced a permanent increase to the generosity of mileage rates to support those who drive for work.
Food prices: Tariffs axed on over 100 food products, including chocolate and fruit juice. Combined with tariff suspensions earlier this year, this will save households up to £21 annually.
Pensions: by the end of this Parliament, 93,000 low-income pensioners in Scotland will pay less tax or none at all on their income, as a result of reducing the disproportionate administrative burden of paying small amounts of tax. 
Wages: Increasing the National Living Wage by 3.9% to £13.21 per hour and the National Minimum Wage by 3.9% to £11.27 per hour for 18 to 20-year-olds and by 3.9% to £8.31 per hour for 16 to 17-year-olds and eligible apprentices. An estimated 180,000 workers in Scotland saw a direct pay rise following April 2026’s increase to the National Living Wage and National Minimum Wage.

Backing growth in Scotland

The establishment of a new Energy Wealth Fund to support Scottish clean energy jobs way into the future.
£18 million will fund a UK Advanced Chip Design Academy led by the University of Edinburgh, building on Scotland’s strengths in advanced technology.
£6 million will expand Glasgow’s Scottish Event Campus (SEC), subject to business case, allowing the venue, which hosted COP26 and the Commonwealth Games, to go bigger and better.
£20 million will see the creation of two Defence Technical Excellence Colleges in the East and West of Scotland.
Extending duty suspensions for 350 goods to help businesses in the chemicals, plastics, hydrogen, automotive and food and drinks sectors.
The Budget strengthens Britain’s national security by fully funding the £15 billion Defence Investment Plan, including £4.7 billion that was previously unfunded. Defence spending supports 12,200 industry jobs in Scotland, up 7% from 2025.

Secretary of State for Scotland, Douglas Alexander, said: “This is a budget that puts money back in the pockets of Scottish households, backs businesses, and puts Scotland firmly at the heart of the UK government’s plan for growth and reindustrialisation.

“We’re helping families tackle the cost of living by cutting the standing charges from gas bills, saving households around £45 a year, then looking to remove them altogether. We’re also extending the VAT cut on energy bills, as well as removing the tariff on heating oil.

“But we’re not just easing the pressure today, we’re building Scotland’s future. £18 million for a semiconductor manufacturing research centre at the University of Edinburgh, £6 million to expand the Scottish Event Campus and grow on the legacy of COP26. That’s creating jobs and good growth in every postcode.

“There’s a boost for Scotland’s public services too, with an extra £600 million for the Scottish Government to spend.”

Funding for public services

The Scottish Government’s main source of funding comes through the block grant. This includes money collected from taxpayers across the UK – including from people in Scotland – which is then available for the Scottish Government to spend on devolved services. The Scottish Government also raises its own revenue, through the Scottish Rate of Income Tax, and non-domestic rates on businesses, for example.  

Spending Review 2025 provided the Scottish Government with their largest spending review settlements in real terms since devolution in 1998, receiving an average of £50.9 billion per year between 2026-27 and 2028-29. 

Changes in the devolution roadmap may have an impact on the funding of the devolved governments. Our approach to fiscal devolution in Scotland, Wales and Northern Ireland is already well established, however, we will engage with devolved governments on any implications for their budgets in the usual way to ensure they continue to be funded to deliver a comparable policy offer.

The Scottish Government has at least 20% more funding per person than equivalent UK Government spending in the rest of the UK. The higher amount reflects that providing services across Scotland genuinely costs more. This means that for each £1 of equivalent UK Government spending in the rest of the UK, the Scottish Government has at least £1.20 to spend per person in Scotland. 

The Scottish Government will receive an additional £600 million, on top of an additional £1.7 billion from Budget 2025 and Spring Forecast 2026.

Ian Murray MP – the MP for Edinburgh South – has welcomed cost of living support for families as the Labour Government announced its Budget today.

John Healey’s Budget provides breathing space for families by extending the cut to fuel duty and the removal of VAT from household energy bills.

It also sets out a plan to abolish gas standing charges, which will save the majority of households an average of £45 a year.

The Budget provides an additional £600mn for Scottish public services, meaning that the Scottish Government have received over £18bn in extra resources since Labour came to power in July 2024.

Across Scotland, Labour also announced it was investing in the Edinburgh-Glasgow Central Belt, a key area for world-leading strengths as identified in the UK’s Modern Industrial Strategy, through £6mn of new funding to expand Glasgow’s Scottish Event Campus (subject to business case) and £18mn new funding for a UK Advanced Chip Design Academy led by the University of Edinburgh.

Ian Murray MP said: “These are Labour decisions: backing families and businesses today while building a stronger Britain for tomorrow.

“I know people are struggling with the cost of living. I see it every day in my constituency mailbag.

“That’s why we’re extending the cut to fuel duty and the removal of VAT from energy bills, and working to abolish gas standing charges.

“It’s also why the Chancellor announced a £100 energy support payment to households in Council Tax bands A – D in England.

“That money will be passed onto the Scottish Government via the Barnett Formula. It’s now over to them to ensure the support is passed onto households here in south Edinburgh and across Scotland.”

UK Budget delivers ‘real cut’ to Scotland’s funding

JENNY GILRUTH – Action on energy bills ‘falls short of what is needed’.

The UK Budget delivers a real terms cut in Scotland’s budget of around £650 million in 2027-28, the Deputy First Minister has warned.

Scotland’s resource block grant is set to reduce by 1.3% in real terms in 2027-28, equivalent to a reduction of around £550 million. Scotland’s capital budget will see a 1.5% real terms reduction in 2027-28, equivalent to around £100 million.

The Deputy First Minister also confirmed that the Scottish Government will ensure that households in Scotland benefit from the £100 payment for energy bills support.

Jenny Gilruth said that while any measures to bring down the cost of energy bills are welcome, the steps confirmed by the Chancellor today fall far short of what is required and do not meet the promises on which the UK Government came to office.

The Deputy First Minister said: “The Scottish Government’s budget will be cut by around £650 million next year – reducing the money we have to spend on public services and supporting people with the cost of living.

“The Prime Minister has previously claimed that he would respect devolution and the Scottish Government – but his actions do not match his words. Cutting Scotland’s budget shows that, yet again, we are being treated as an afterthought.

“The Scottish Government will ensure that households in Scotland will benefit from the one-off £100 payment for energy bill support, however, it is clear that the measures announced today fall far short of the action which is required. “

“Furthermore, this support does not come close to meeting the promises on which the UK Government came to office, including reducing energy bills by £300 which remain significantly higher than they were in July 2024. The UK Government has failed to meet the moment and has failed to keep its promise.

“It is also unacceptable that there was no announcement about ending wider austerity policies which are pushing families into poverty like the bedroom tax, the benefit cap and “young parent penalty” in Universal Credit which would make a significant difference to tackling poverty.

“The Chancellor had the opportunity to lift thousands more families out of poverty, and he has chosen not to.

“We will now take the time to assess the full implications for Scotland of today’s statement.

“I will be announcing further details as part of the Scottish Budget on 3 December.”

Anti-poverty campaigners say Budget won’t share the wealth

The Poverty Alliance welcomed Budget moves to help people with rocketing energy bills – but warned they won’t go far enough to help people in fuel poverty.

Peter Kelly said: “There are nearly 750,000 households in Scotland who are in fuel poverty. The energy price cap today is £1,723, and in January it’s predicted to rise to nearly £2,000. In that context, a payment of £100 is welcome, but it won’t be enough for people who are already being pushed into debt and arrears.

“As well as looking at standing charges on energy bills, the UK Government must bring in a social tariff – making sure that no-one is hit with bills that they simply can’t afford to pay.”

Scotland’s anti-poverty network expressed disappointment at the lack of any major extra investment in social security.

Peter Kelly said: “We can’t expect people to build a life out of poverty on quicksand. When rates of Universal Credit and other social security payments are too weak to support people, it pushes them closer to destitution and makes it harder to build a better future.

“We hope that the forthcoming reviews into support for disabled people and young people have clear vision for improving financial security and investing in a stronger society for all of us.”

The Poverty Alliance also expressed disappointment over the Chancellor’s failure to tax wealth in the same way that work is taxed.

They had backed calls to equalise the way Government treats wealth and work, by bringing rates of Capital Gains Tax into line with Income Tax.

Tax Justice UK estimates the move could have raised £14 billion for the Treasury, with the Scottish Government getting over a billion pounds a year extra for its budget.

Peter Kelly said: “People are losing faith in politics because they feel that politicians aren’t working to meet their needs. Taxing wealth in the same way as work would bring in extra resources that we could invest in building a better future, and a more just and compassionate society.

“We all rely on social security and local services being there when we need them – and for people who are pushed into poverty, they are an essential lifeline.

“The money raised from fairer taxes on wealth could have been used to take more children out of poverty.”

STUC: Budget provided sticking plasters when Scotland needs radical surgery

Reacting to the UK Government’s Budget, STUC General Secretary Roz Foyer said: “We always knew exorcising the ghost of Thatcher and eradicating 40 years of neo-liberalism was going to be a tall order for the Chancellor and there are some welcome tricks in the Budget, but not enough to scare away fears of rising costs.

“Whilst this Budget offers some helpful sticking plasters on energy costs, cost-of-living support and food prices, it falls short of the radical surgery needed to fix the UK economy and support working-class communities. Perhaps most significantly, the Budget failed to set out the radical rewiring of the state and the end to neo-liberalism that the Prime Minister himself had promised.

“Payments to stave off the cold for those in targeted council tax bands are a good first step in lieu of bringing down wholesale energy bills and it is right that the Chancellor has listened to the calls of unions to tax the banks to fund this measure. However, bills are likely to rise far quicker than this payment can offset and we will continue to press the UK Government to go further and faster, given the ‘big four’ banks made £29 billion in the first six months of 2026 alone

“With an expected £600 million allocated to Scotland, Scottish Government ministers cannot credibly sit on their hands and plead poverty. The Scottish Government should urgently review its public sector cuts agenda in light of this Budget.

“Rewiring the state will take longer than just one Budget and changes to procurement rules which strengthen British jobs and domestic supply chains are to be welcomed.

“The commitments made on defence spending require further examination, but unions are clear that funding for defence cannot come from public sector efficiencies. Co-funding for Defence Technical Excellence Colleges (DTECs) in both the east and west of Scotland is welcome and should help provide well-paid, unionised jobs.

“This Budget doesn’t yet offer the concrete reindustrialisation Scotland needs, nor the further devolved powers for our Parliament and local authorities that had been envisioned. The Prime Minister must work at pace to show that his words on ensuring communities are empowered from the bottom-up, rather than the top-down, were not hollow.

“Workers can ill afford any further delay to the hope that was promised to them.”

Responding to Chancellor John Healey’s Autumn Budget, Morgan Vine, Director of Policy and Influencing at Independent Age said: “Today’s Budget made some important commitments that will play a part in easing the financial burden on people of all ages, including those in later life that Independent Age supports.

“We’re pleased to see changes we’ve campaigned for, alongside older people on low incomes, including protecting the poorest pensioners from tax bills as their State Pension increases – a decision that will help current and future pensioners. And some support for energy customers to ease spiralling bills, including providing £100 directly to households in England’s higher council tax bands (A-D) through the Household Energy Payment scheme.

“However, some serious problems remain unaddressed. We believe the UK Government can go further to tackle key areas driving financial hardship across all generations. Every day we hear from older people on low incomes who are cutting back on food, living in cold homes, or skipping showers to keep their bills down. This is no way to live.

“Frozen Local Housing Allowance that keeps private renters of all ages stuck in poverty needs to be uprated to reflect the true cost of renting. We need long-term action to protect the poorest households from the frequent energy price shocks driving up bills with the introduction of a comprehensive and well targeted energy social tariff. And, to lift people out of water poverty, a single social tariff for water is needed across England and Wales to end the postcode lottery of support.

“We will continue to stand alongside older people on low incomes, and work with the UK Government to build on the positive steps taken today.”

Helen Barnard, director of policy and research at Trussell, said: “We are disappointed that the government has not acted today on one of the biggest pressures facing low-income renters.

“We welcome seeing the significant support provided for people’s energy bills, which will make a real difference as the colder months draw in. However, the decision to keep housing support for private renters on low incomes frozen is a misstep that will continue to drive people towards homelessness and to the doors of food banks.

“We know from our research that over half of private renters on low incomes in receipt of Local Housing Allowance to help pay their rent, have run out of food in the last 12 months and haven’t been able to afford more. Nobody should be forced to choose between paying the rent and putting food on the table. But for increasing numbers of UK renters this is already a bleak reality.

“If the Chancellor is serious about tackling the cost of living, the best test will be whether fewer people need to turn to a food bank because they can afford the essentials like rent, energy bills and toiletries.

“The government has already taken bold steps towards this, including by lifting the two-child limit, However, unless we see action to close the gap between support and essentials like rent, the UK government will fail to meet its manifesto promise to end the need for emergency food.”

Amie, 45, who has experience of turning to a food bank, said: “Every week I’m forced to choose between keeping a roof over my head or putting food on the table, even though I work – just like so many people on the lowest incomes. As the cost of rent has skyrocketed, I had hoped the Chancellor would see sense and unfreeze Local Housing Allowance today so it actually meets the costs of renting a home.

“The extra help with energy bills announced today will help but I’m disappointed the government hasn’t chosen to act on the biggest problem my family is facing, which is keeping a roof over our heads.

“I don’t struggle to pay for our housing because I can’t budget, I struggle because the cost of my rent keeps rising far beyond what I can pay and the support just isn’t there. That leaves families like mine constantly having to make impossible decisions.

“Tomorrow I’ll still wake up worrying about the same things I’ve been worrying about for months. How am I going to cover the rent? Will there be enough left for food? Those are the questions families like mine will still be asking.”

Commenting on the UK Government’s Budget announcement, COSLA Resources Spokesperson Councillor Kelly Parry said: “Councils are central to local economies, tackling child poverty, and delivering key community services.

“For this reason, the elements of the UK Budget that signal further devolution of power are encouraging, however single-year budget settlements from UK Government and Scottish Government are still not allowing councils to achieve their full potential.

“As we look ahead to the Scottish Government’s Budget on 3rd December, it is vital that Ministers prioritise local government with a fair, flexible, and sustained funding settlement.

“Removing ring-fencing and single-year budget constraints will empower councils to invest in preventative services and deliver real, long-term change for our communities.”

Budget to give Britain breathing space today and fresh hope for the future

Today (Wednesday 28 October), the Chancellor will set out how the Budget will make Britain “more resilient” to global shocks, while helping households with “everyday costs”, backing businesses and entrepreneurs, and kicking off the “long-term action” needed to get “energy costs down for good”

In a video message, the Chancellor of the Exchequer, John Healey said: “Breathing space for today and fresh hope for the future. That’s what today’s Budget will deliver.

‘The world’s a highly uncertain place. Conflicts abroad are pushing up energy prices, and the cost of living here at home – piling pressure on the families, on businesses, and on our public finances.

‘But Britain’s economy is showing real signs of resilience: investments up, productivity is growing, and we had the joint fastest growth in the G7 in the first half of this year.

‘We can’t stop these shocks that hit Britain, but we can make Britain more resilient when they do.

‘So, this Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good.

‘But breathing space today must go hand-in-hand with building for the future.

‘So, we’ll back British businesses and entrepreneurs, we’ll invest in the technologies that drive future growth, and we’ll build more homes, shift power out of Whitehall, so that leaders locally can drive growth in every postcode.

‘And in an uncertain world, we will strengthen national security and our defences, as well as our support for Ukraine.

‘We’ll do all of this responsibly, sticking within tight fiscal rules, and make sure every pound is well invested.

‘Because this Budget is about getting through this difficult moment. But it’s also about putting Britain on a future path, a better future path.

‘Breathing space today, and fresh hope for the future.”

Chancellor abolishes standing charges on gas bills to make payments fairer

Standing charges from household gas bills will be removed for around 23 million homes.
Action from the Chancellor and Energy Secretary will make the energy system fairer and give some families breathing space.
Budget will “draw a line in the sand” on energy policy that has left billpayers exposed, giving families breathing space for today and hope for the future.

Tens of millions of households will no longer pay standing charges on their gas bills as the Government gives families more control over what they pay and some more breathing space.

A standing charge is a fixed daily fee added on top of a household gas bill, regardless of how much gas has been used. A household could use no gas at all but still must pay the standing charge.

The Chancellor will announce today an end to this unfair and outdated practice. He will ask Ofgem to deliver removal of these charges – which are £108 a year for the typical household on average – in 2027 or as soon as possible after.

Instead, these fixed costs will be paid on the unit rate, which could save 60% of account-holding households around an average of £45 off their annual bill.

Households not seeing an automatic saving will still have better control over their bills without the worry of affording the standing charge, and the government will set out in due course targeted mitigation for a small number of households.

This comes ahead of today’s Budget that will “draw a line in the sand” on a UK energy policy that has seen wrong turns taken for over four decades. The Prime Minister has previously spoken about reforming a broken energy market, so it better serves the public interest, rather than piling costs to bills and leaving British households even more exposed in an uncertain world.

Prime Minister Andy Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills.

“I am determined to reform our broken energy market, so it better serves the public interest.”

Chancellor of the Exchequer John Healey said: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.

“My Budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”

Energy Secretary Miatta Fahnbulleh said: “Too many families face unfair charges, so we’re making it easier for people to take control of their energy bills.

“By removing one of the nation’s bugbears – taking standing charges off gas bills, with extra support for those who need it – we’ll give millions of people breathing space.

“Tackling affordability is my number one priority, and I will keep doing everything I can to protect people from unaffordable bills.”

Greg Jackson, Founder and CEO of Octopus Energy Group, said: “This represents real joined-up thinking to make a fairer, more efficient energy system, delivering what customers want – lower standing charges and further improving the ratio of electricity to gas prices.

“Most customers would see a cut in their gas bills which is crucial, but would also enjoy even higher savings if they can move to heat pumps when it suits them.”

This follows the Government’s VAT cut on electricity bills that came into effect at the beginning of this month which is already supporting households.

It means the Energy Price Cap from October was £45 a year less than it would have been. Around a third of households on fixed tariffs are not affected by the price cap, meaning their electricity prices will have fallen when the VAT cut took effect.

While the government is giving people short term relief on their energy bills, it is also taking action to fix Britain’s energy problems for the long term.

Last week, the Government announced a new Energy Wealth Fund which will support investment in cheap, clean power.

One Parent Families Scotland: Budget asks to address poverty

The UK Budget will be announced tomorrow.

Here’s what we want to see, so that we can invest in a positive future for everyone and act on the things that matter most:

#UKBudget

#UKPolitics

#Budget

#OneParentFamiliesScotland

Chancellor unveils UK plan for AI

Major package to unlock the opportunities of AI in every postcode, scale up home grown AI firms, and keep UK safe from threats announced by the Chancellor

A major package of investment to unlock the opportunities of AI in every postcode, scale up home grown AI firms, and keep the country safe from hostile threats will be announced by the Chancellor next week.

People across the country will benefit from stronger infrastructure and investment in local economies as the Chancellor is set to make AI a part of his Budget. He has announced hundreds of millions in investment to guard against the risks of AI while harnessing the opportunities to raise living standards for working people, back British industry and ensure our country is better off.

The Chancellor’s plans include £10 million per year to lead the UK’s work in understanding how AI will reshape jobs and industry, and how Britain needs to prepare for it, addressing concerns about AI’s replacement of jobs from workers across the country and making sure government is best placed to help people into jobs in future.

The investment announced yesterday helps protect against those risks, and cuts UK dependence on other countries to bolster our security and resilience while supporting home grown businesses and talent.

It will boost the UK’s ability to build our own chip design and cyber defences, and will go further to make sure AI works for Britain, boosting the economy, speeding up public services, and keeping Brits secure.

New investments in AI chip design capability in Edinburgh alongside a new AI Centre of Excellence in Manchester to develop talent will help ensure the benefits of harnessing AI are felt in every postcode through the creation of jobs and new routes to training and skills.

Chancellor of the Exchequer, John Healey MP, said: “AI will transform daily life: every firm, community, hospital, school, and every aspect of our economy can benefit.

“I understand and share the concerns of working people, so I am setting out a distinctively British approach to AI – one that doesn’t leave workers behind and defends our national interest, while ensuring the benefits of AI-enabled growth are felt right across the country.”

AI Minister Kanishka Narayan said: “Our new AI Biosecurity Lab will be a major new global institution, bringing together world-leading scientific expertise to protect people from emerging biological threats and ensure Britain leads the world in AI safety and security.

“As AI becomes more powerful, Britain must have the capabilities to protect its people and shape its own future. That means staying ahead of emerging threats, from cyber attacks to biological risks, while building more of the critical technology our security depends on.

“We cannot afford to rely entirely on technology built overseas.

“By backing British science, advanced chips and our own AI companies, we can strengthen our national security, rebuild Britain’s industrial strength and create good, skilled jobs across the country.”

Security Minister, Dan Jarvis, said: “I’m proud the UK has repeatedly been at the forefront of global efforts to use AI for the benefit of humankind.

“Today’s investment will help the UK seize the opportunities AI presents to strengthen our national security, while staying one step ahead of those who seek to use AI to do us harm.”

AI Security

The economic opportunities from AI will only be realised if our critical infrastructure, public services and businesses are resilient to cyber, biological and emerging AI-enabled threats. This package strengthens Britain’s ability to manage those risks, gives investors and innovators confidence to build here, and will help drive adoption across businesses and public services to unlock growth all across the UK. To this end, the Chancellor has announced:

£165m for a new National AI Biosecurity Initiative, including £100 million for a world-first AI Biosecurity Lab (AIBL) to apply AI to the detection and surveillance of biological threats, and £65 million to strengthen bio surveillance and develop medical countermeasures for priority pathogens. As a vote of confidence in the UK’s leadership on AI talent and tackling biological threats, AIBL will be supported by up to £200 million in AI model credits from OpenAI and Anthropic, plus partnerships with Google DeepMind and London-based AI life sciences pioneer Basecamp Research.
An additional £120 million investment in the AI Security Institute to ensure the UK remains at the forefront of understanding AI capabilities and risks through its testing and research, building a shared scientific understanding by testing new AI systems and developing technical standards to ensure risks are mitigated.
Investing £60 million into a National Cyber Shield that will use agentic AI to improve the UK’s cyber defences, including a £25 million challenge fund to support UK AI and cyber security innovators and scoping for a new regulatory sandbox to support deployment of agentic cyber security solutions across critical national infrastructure, the public sector and industry.
A new £70 million National Exposure and Real-Time Vulnerability (NERV) Centre will deploy AI tools to identify cyber vulnerabilities across our critical infrastructure and the economy.

Homegrown capability to put Britain in the driving seat

As well as protecting ourselves from future risks, this package backs British firms, research institutions and home grown talent to develop AI here in the UK, where we can make sure it is shaped by our values and serves the British public. This will give us greater control and make sure the UK isn’t reliant on technologies developed elsewhere.

An additional £60 million for the Sovereign AI Fund to enhance its ability to invest directly in promising UK AI companies, to support them to scale and succeed here. This will include expanding into a new focus area of Physical and Industrial AI, building on the UK’s leading research base and growing strengths in areas such as robotics, autonomous systems and advanced manufacturing.
An additional £60 million will support Sovereign AI’s R&D Procurement Scheme, which will deliver innovative solutions to challenges across the health and care system and in AI security, assurance and safe adoption.
Building up the UK’s AI hardware capabilities with £18 million to support a new UK Advanced Chip Design Academy, helping build advanced chip-design skills, connect British research more directly with advanced semiconductor manufacturing, and support the government’s drive towards reindustrialisation

Good growth in every postcode

Every part of the country must feel the benefits of the economic opportunities from AI. Support for British innovation, investment in AI to improve public services and programmes to help communities use AI to support local economies will help drive up living standards and unlock growth in every postcode.

£15 million for an AI Challenge Prize to reward innovative AI that fixes people’s common problems with the first award targeted at firms and innovators solving health issues with AI.
An additional £23 million over the next three years for the AI Economics Institute, the world’s first government-backed research institution dedicated to analysing the economic impacts of AI. The funding will underpin the Institute’s comprehensive research agenda on how AI is affecting productivity, growth, jobs and living standards. As part of this, the AIEI will also support the UK’s international research collaboration on these issues, including in support of the UK’s G20 Presidency next year.
Investing in a new National Cyber Security Centre (NCSC) AI Cyber Security Centre of Excellence in Manchester to train and develop the next generation of government cyber and AI experts, so that more people can get the skills they need to do the jobs of the future.
£30m to kickstart local AI partnerships with Mayoral Strategic Authorities, empowering local leaders to bring together councils, businesses, universities, colleges and other partners to pursue locally-led approaches to AI adoption to improve services, support local businesses, including SMEs, and provide workers with AI skills.

AI is already helping to deliver better public services across the country. For example, in the NHS it is already being used to help clinicians analyse over 210,000 chest X-rays each month, around a third of all chest X-rays in the NHS. This has led to an 11.5% increase in suspected lung cancer cases identified within 24 hours, meaning around 400 more patients receive faster clarity each month, while reducing the average wait for follow-up CT scans from 6.3 to 5.6 days.

This is alongside HMRC’s AI-powered digital assistant, Ask HMRC, which supported around 6.3 million customer interactions in 2025-26, helping them navigate services and resolve routine enquiries while freeing up around 400 full-time equivalent work hours for more complex work.

Together, this sets out a distinctively British approach to AI: managing risks responsibly, ambitious about the opportunity, and backed by the institutions, capabilities and infrastructure needed to manage the transition. It will enable Britain to shape the AI age rather than simply respond to it and ensure people across the country are better off as a result.

Scottish Government facing projected real-terms block grant cut

UK Budget ‘must bring bills down’

The UK Budget must bring down energy bills for hard-pressed Scots and reverse the projected cut in funding available for Scotland, the Social Justice and Housing Secretary has said.

Shirley-Anne Somerville is calling on the Chancellor of the Exchequer to reverse the projected real-terms cut in Scotland’s block grant funding for 2027-28 as set out in the UK Spending Review to support improved public services.

The Social Justice Secretary is also demanding action to bring down energy bills which are hundreds of pounds higher than when the UK Government came to office. An end to welfare polices like the benefit cap are also a key priority for the Scottish Government.

Ms Somerville said: “The Chancellor must meet some key tests when he presents the Budget this week – he must reverse the real terms funding cut Scotland faces as set out by the UK Spending Review, and he must deliver serious support with the cost of living. People need help now.

“The Scottish Government wants to drive NHS waiting times down further, keep improving our schools and lift more children out of poverty. But we will be doing that with one hand tied behind our back if the UK Government continues with the planned real terms cut to our funding.

“Energy costs in particular are causing real hardship across Scotland – and at a time when the Treasury is set to benefit from even more of Scotland’s energy resources, the Chancellor has no option but to act.

“We are one of the most energy rich nations in the world and yet we pay some of the highest bills in Europe – it just doesn’t add up.

“And with bills already hundreds of pounds higher than the UK Government promised when they came to office and set to grow further, any failure to bring down bills substantially in this Budget would be unforgiveable.

“An end to wider policies which are pushing families into poverty like the bedroom tax, the benefit cap and `young parent penalty’ in Universal Credit is long overdue and would make a significant difference. The freeze on Local Housing Allowance rates is also preventing people on the lowest incomes from accessing safe and affordable housing and should be scrapped.

“If the UK Government will not take the action required this Wednesday to boost living standards, it will be clear that little has changed under the new Prime Minister and that Scotland should choose the fresh start of independence.”

Hatchet Man Healey takes axe to delays holding back growth

Chancellor John Healey has set out his plan to drive growth in every postcode, backing Britain’s extraordinary strengths to deliver benefits across the whole country.
New ambition to double the number of UK unicorn firms in clear signal of ambition for British economy, alongside powers which will help businesses test and scale technologies from delivery robots to medical treatments.
Northern 500 initiative and £150m British Business Bank fund to back high-growth firms across the North.

Speaking at the Manufacturing Technology Centre in Coventry today (Monday 7 September), the Chancellor laid out how he will take an axe to delays holding back growth, from backing British business and giving local leaders more power, to clearing away the delays that hold back investment.

Changes to the judicial review process for Nationally Significant Infrastructure Projects announced today will fix a system where every decision can face another challenge, consultation or review before a single brick is laid or a spade enters the ground.

Sending a clear signal on his level of ambition for UK business, he also set a goal to double the number of unicorn firms – companies valued at over £1billion – in the UK.

The Government will work with the Business Department to identify the next generation of high-growth companies and help them overcome regulatory barriers, access capital, and win government contracts as an early customer.

And he announced the Northern 500: which will bring together 500 of the North’s most ambitious mid-sized businesses into a single growth community led by the Great North partnership of Mayors and supported by the private sector and central government.

Chancellor John Healey MP said: The UK is the third in the world for innovation. Our record is extraordinary… But too often, ideas born here in Britain have to go elsewhere to find the capital they need to grow…

“I’m setting an ambition to double the number of unicorn firms in this country. Together, with Johnny Reynolds I will identify the next wave of unicorns, with the state as an early first customer to ensure they have the necessary backing to scale.”

The Chancellor also committed to delivering new powers to oversee ‘sandboxing’ that will be ready to deploy next year. Sandboxing is the term for how companies and regulators can work together to test new models or features in safe and controlled environments.

The new powers, to be delivered through the Business Department’s Regulating for Growth Bill, will let businesses test cutting-edge products and technologies safely, establish what works and scale more quickly.

Potential use cases of these new powers include patient access to innovative treatments, rollout of delivery robots, defence technologies or maritime autonomous vehicles.

Today’s speech also set out reforms to tackle the bureaucracy holding back growth and investment, putting decision-making back where it belongs and helping ensure people in every postcode benefit from a government focused on delivery.

Chancellor John Healey MP added: I will take an axe to the thicket of consultation, litigation and administration that has a stranglehold too often on private investment.…

“And let me say this – the people who elected this government expect us to get on with it. The role of government is to act.

Judicial review challenges typically delay nationally important infrastructure projects by a year and a half. For example, Sizewell C was delayed by two judicial reviews, both of which ended up being dismissed by the courts, delaying the delivery of clean power to the equivalent of six million homes and 10,000 jobs at peak construction.”

The Chancellor has also instructed the Government to embrace risk when it needs to in order to get things done. Under the current system, decisions have been held back, for example:

Despite 99% of respondents to a Call for Evidence supporting microchipping cats in the same way as dogs in 2019, it took nearly 5 years to make it happen: one call for evidence, two further consultations, legislation through Parliament and then finally enacted in June 2024.
The planning process for East West Rail began in 2019 and has already involved four rounds of public consultation in 2019, 2021, 2024 and 2026. And it could still face more challenges before getting over the line

That’s why from today, Ministers have been told that public consultations are not always required and have encouraged departments to find other ways to get views from the public and experts when developing policies.

The reforms support the Prime Minister’s drive for a faster, more effective state through No10 North, which brings together decisionmakers from across government to accelerate growth and strengthen delivery. 

The Treasury and No10 North have been working in lockstep and directly with departments to identify where projects are stalling, why, and which changes to law, regulation or process are needed to get them moving again.

The reforms also reflect lessons from the Fingleton Review, which highlighted how excessive risk aversion and slow decision-making can hold back the delivery of major infrastructure projects.

To tackle delays holding back growth and investment, the Government will introduce a package of reforms to give parliament the ability designate and approve the country’s most important infrastructure and give them significant enhanced protection from legal challenge, reduce unnecessary consultations and reporting requirements, ensure legal challenges are raised and resolved earlier, and make clear that legal risk should inform ministers’ decisions, not dictate them.

Together, the changes will help deliver major projects more quickly while strengthening democratic accountability and giving greater certainty once decisions have been taken.

The Government will also launch a review of the costs of rail infrastructure in the UK in the coming weeks, to identify further practical reforms to radically cut the costs of delivering new rail infrastructure in the UK.

Together, these measures will help build a state that delivers rather than delays, giving government greater confidence to act and ensuring approved projects can move forward more quickly.

The reforms form part of the Government’s wider mission to drive good growth in every Postcode, unlocking the investment needed to create opportunities across the country.

They are a key step in realising No10 North’s focus on stripping away the administrative sludge that has built up around government, restoring democratic accountability and replacing a culture of process with a culture of delivery. 

No 10 North will continue working with the rest of government to identify further blockages in the months ahead.

Burnham to cut tax on household electricity bills to give breathing space on cost of living

New Prime Minister takes immediate action to cut taxes on electricity bills to give millions of households breathing space this winter

New Prime Minister takes immediate action to cut taxes on electricity bills to give millions of households breathing space this winter
Tax cut this year funded from cancelled Digital ID programme will see VAT on electricity bills removed from October 1
In one of his first acts as Prime Minister Andy Burnham promises to “put more money in people’s pockets and bring back hope”

Millions of households across the UK will benefit from immediate action to help with their electricity bills this winter, the Prime Minister has announced as one of his first decisions in office.

This follows his commitment to the nation on the steps of Downing Street yesterday to give people some breathing space and help with the cost of living.

Government is tackling rising bills with a tax cut to remove VAT from domestic electricity bills from October 1 in time to impact the next Ofgem price cap. This immediate action applies and is funded for this financial year.

The cost of this immediate action for this financial year – taken now, before the next price cap – is being funded from the cancellation of the (£1.8bn) Digital ID programme.

Any further action, including on funding for longer-term measures, will be taken at the Budget alongside an OBR forecast. All decisions at that point will continue to be funded and also consistent with the government’s fiscal rules.

Prime Minister Andy Burnham said: “Westminster has not been working for people for too long, with families struggling with the cost of living.

“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.

“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”

Cutting VAT on electricity bills is expected to take around £45 off the yearly Ofgem price cap in October. This is on top of the £150 removed from bills at the last Budget.

By targeting electricity bills, more people will be supported with rising bills and the government is helping to keep inflation down.

All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget.

Small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit. 

Chancellor of the Exchequer John Healey MP said: “For too long, too many people have struggled with the cost of living.

“Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.

“This measure is funded this year from cancelling the Digital ID programme, and it will help bring down inflation while supporting households in every postcode.”

Welcoming the announcement, local MP Tracy Gilbert MP said: “Families across Edinburgh North and Leith have been paying the price for the cost-of-living crisis for far too long. This VAT cut on energy bills is welcome news that will make a real difference to household finances.

“Labour is taking practical action to reduce costs for working people and deliver the change people voted for. This is a government that is on your side, helping families with the pressures they face every day.”

Responding to the announcement of the scrapping of the 5% VAT charge on electricity bills, Independent Age Chief Executive Joanna Elson, CBE, said: “Today’s VAT cut to electricity bills is an important and welcome acknowledgement that immediate action is needed to drive down energy costs.

“We hope the removal of the 5% VAT charge from October – reducing the typical annual bill by around £45 – signals the start of sustained action by the new Prime Minister to ease the relentless financial pressures on older people living on low incomes.

“We are already hearing from older people on low incomes who are rationing their energy use or cutting back on the essentials, and that’s before the winter months take hold when energy use increases.

“If Andy Burnham is to make good on his pledge to ease the cost-of-living pressures and help millions of older people living in poverty, we urge him to go further and lead his government to increase the Warm Home Discount from £150 to £400 without adding the cost to energy bills and develop a more comprehensive energy social tariff for people of all ages on low incomes.”

Cutting VAT on electricity bills is expected to take around £45 off the yearly Ofgem price cap in October. This is on top of the £150 removed from bills at the last Budget.

By targeting electricity bills, more people will be supported with rising bills and the government is helping to keep inflation down.

All suppliers are expected to pass the VAT reduction on to all customers, including those on fixed tariffs, as they did with the £150 of costs taken off energy bills announced at the last Budget.

Small businesses who qualify for the domestic energy VAT relief and are not registered for VAT, as well as charities and residential care homes eligible for the reduced rate will also benefit. 

As part of the ‘day one commitment to bring back hope to Britain’, the change supports the poorest households, who spend a higher percentage of their income on energy bills.

Energy bills have risen since Russia’s invasion of Ukraine and have been exacerbated because of the war in Iran. But people need support now, which is why the government has acted to provide immediate breathing space for millions of households.