British budget eases energy bills, taxes banks and increases defense spending

British Chancellor of the Exchequer John Healey's first budget attempted to serve voters and investors at the same time. According to CNBC, the plan reduces energy costs for families, increases taxes on banks and directs billions in resources to defense, Ukraine and artificial intelligence. The markets reacted, in general, positively.

The background is uncomfortable. As a net importer of energy, the United Kingdom is exposed to shocks from abroad, and inflation accelerated this year, with fuels pushing the annual index to 3.5% in September. Healey attributed part of this pressure to the conflict between the United States and Iran, a war that, in his words, was not wanted by the country.

Among the measures announced are the end of the fixed tariff (standing charge) on the gas bill used for residential heating and the extension, until July 2027, of a tax benefit on electricity for millions of households. There are also payments of £100 (about US$133) to a portion of families. Healey stated that the intention is to breathe life into homes and defended a radical change in the energy sector.

The government, led by Prime Minister Andy Burnham, had promised to ease economic pressure ahead of the budget. At the same time, the cost of financing public debt has risen sharply this year, and the market expects the Bank of England to raise interest rates at its next meeting. According to CNBC, Healey was careful not to upset the markets.

What is at stake is whether the package can contain inflation without weighing even more on public accounts. The government aims, at the same time, to provide relief for the consumer, more revenue from the banking system and increasing spending on defense and technology. For those who prioritize fiscal responsibility, the combination of more taxes and more expenses leaves an open central question: how much does each of these promises cost and who pays the bill in the medium term.

What changes for the investor

For those who invest, the budget touches on three fronts. The first is interest: with the market already counting on a hike from the Bank of England and with the cost of government financing on the rise, the risk of higher rates remains on the radar. Relief on energy bills could help contain inflation in the medium term, but this is not guaranteed. The second front is the banking sector, which will carry a higher tax. The third are the defense, technology and energy segments, which can gain space in public priorities. None of this indicates direction for prices, and the final effect will depend on the execution of the plan and the evolution of the external scenario.

Automatically translated from Portuguese.