Read the Budget 2026 here.
The Chancellor of the Exchequer, the Rt Hon John Healey MP, delivered the Government’s first Budget against a backdrop of rising living costs.
The Budget focused on easing pressures on households, incentivising new businesses, reforming welfare and expanding devolution.
For VODG members, several announcements are particularly welcome, including the removal of the Carer’s Allowance cliff edge rule, a rise in the National Living Wage, and measures to ease the cost of living.
While there was also commitment to work towards a National Care Service in England, with personal care, free at the point of use, the Budget missed an opportunity to ease existing challenges facing the delivery of care and support including the ongoing burden of increased Employer National Insurance Contributions (ENICs), successive welcome but unfunded wage increases, and the growing gap between costs of delivering statutory care and support and public sector funding.
Social Care, AI and NHS productivity
The Chancellor and Secretary of State for Health and Social Care have commissioned Mark Bailie to lead an independent review on NHS Productivity and AI reporting in early 2027, feeding into the next Spending Review.
Furthermore, an additional £190 million NHS funding have been made available to support additional pressures on the NHS over winter and the remainder of the financial year.
The broader Budget document reiterated the adjustment of the Triple Lock to fund a high-quality National Care Service drawing from the Casey Commission’s report due in 2027.
Carer’s Allowance and Welfare Reform
The Chancellor announced that the Carer’s Allowance cliff-edge rule will be scrapped. Under the existing approach, unpaid carers can lose their entire benefit if their earnings exceed the permitted limit. This will be replaced by a gradual reduction through a new £1-for-£1 taper system.
While the timetable for bringing in these reforms could be more ambitious, VODG welcomes this announcement. The removal of the cliff edge is an important step towards ensuring that unpaid carers are not disproportionately penalised for modest increases in earnings.
The Chancellor also confirmed that the Milburn and Timms Review will report next month, followed by a White Paper and legislation in the new year.
VODG will look to the reviews and subsequent proposals to consider how welfare reform can better support disabled people, promote independence and participation.
Business Rates and Devolution
The Budget extends Small Business Rate Relief to an additional 70,000 businesses, with the threshold for eligible retail, hospitality and leisure businesses increasing to £18,000, reflecting the Government’s intention to reduce the cost of doing business.
The Chancellor also announced measures to increase local authorities’ and mayoral authorities’ ability to invest in their areas by retaining a portion of business rates. A share of income tax receipts is also intended to provide longer-term funding for local infrastructure by 2028.
VODG will monitor these developments as they could create opportunities to improve services and respond to local needs, but this will depend on how resources are allocated and how commissioning arrangements support provision.
Homelessness and social housing
The Government committed a further £430 million towards ending rough sleeping and providing routes off the streets for people experiencing homelessness. The Chancellor described tackling homelessness as a moral mission and recognised rough sleeping as a symptom of wider systemic problems.
The Budget also reiterated the Government’s housing ambitions, including no new changes to building regulations, removing biodiversity requirements on brownfield sites, and VAT-free building for social housing providers, bringing total Government commitment of £40 billion on council housing.
The Cost of Living and Broader Economic Headlines
Measures to ease household costs include removing standing charges from domestic gas bills, a £100 energy payment for households in council tax bands A to D, and suspending tariffs on more than 100 supermarket products.
The Chancellor also announced a new Pension Tax Allowance for pensioners and a 3.9% increase in the National Living Wage.
The Office for Budget Responsibility’s headline forecasts included:
- Economic growth: GDP is forecast to grow by 1.2% this year.
- Public finances: Borrowing is forecast to fall to 4.2% of GDP this year, while public debt is projected to stand at 83.2% of GDP.
- Debt interest: The Government faces an additional £14 billion in debt interest costs this year.
- Fiscal headroom: The Government has £15 billion of economic headroom by 2029/30.
VODG’s Opinion
VODG's initial statement to the Budget can be found here.
VODG welcomes the Government’s ongoing commitment to social care and announcements made by the Chancellor on the removal of the Carer’s Allowance cliff edge, measures to address the cost of living, local authority funding changes, and continued investment to tackle rough sleeping.
However, the Budget could have provided a more immediate solution for social care, alongside the Government’s longer-term ambitions. VCFSE organisations providing care and support for disabled people of all ages, continue to face significant pressures, yet there were no major announcements addressing the sustainability of social care funding, commissioning practices or workforce support.
VODG will continue engaging with Government officials to ensure members’ experiences and priorities are relayed. The conclusions of the Casey Commission, Timms Review and Milburn Review will be important opportunities to address the structural challenges facing social care and improve outcomes for the sector
Useful links
- Full Budget Document
- Chancellor’s Speech in full (text).
- Link to re-watch the Chancellor’s speech
- Budget Collection Page, which includes the Budget document, supporting documents and supplementary documents.
- Collection of Budget Factsheets.