Badenoch goes on to describe her party's proposals as "tough love" to grow the economy.

She says the Tories would cut government spending by £70bn, "including "£36bn from welfare".

"We would use half of that money to cut the deficit, so Britain doesn't go bankrupt, and borrowing rates start to calm down," Badenoch says.

She goes on that defence spending would be a priority for a Tory government, "because keeping our country safe should be the first priority of any government".

Badenoch adds that getting public finances under control and living within our means "allows us to cut taxes, because that's what really gives people breathing space".

She lists off cuts the Tories would like to see, including scrapping the carbon tax, scrapping stamp duty, and abolishing inheritance tax on family homes.

That, she says, "is going to be the choice at the next election".

With that, she ends her response in the Commons.

Image source, House of Commons

The leader of the opposition tells Healey that graduate vacancies are down "almost 50%" this year after being the "the worst on record" in 2025.

She says she was hoping the chancellor would announce something relating to Plan 2 student loans, but says he "hasn't even done that".

Companies are reporting "140 applicants" chasing every job, Badenoch says, adding that unemployment has risen by a quarter of a million people since Labour got in.

Continuing on welfare, Badenoch says this is "not just about cutting the benefits bill" but adds that the welfare burden is "unfair" on those working hard to make ends meet.

"How do you think they feel when they hear working age welfare is costing every taxpayer £4,000 a year?"

Referencing Neet figures, she adds that one million people wake up "with nothing to do and nowhere to go" - suggesting Labour is creating a "lost generation".

We have to start showing people "some tough love", she tells the Commons.

How much does the UK spend on welfare? At its last forecast in the Spring, the Office for Budget Responsibility (OBR) estimated that the UK would spend £333bn (or 10.9% of GDP) on welfare this year.

This is forecast to reach £407 billion (11.2% of GDP) by 2030-31. Around half of welfare spending goes on pensioner benefits like the state pension.

Dearbail Jordan
Senior business and economics reporter

Inflation is expected to rise more than previously thought both in 2026 and in the coming years, according to the OBR.

That’s not really a shock. The last time the forecaster released its economic outlook in March, the US-Israel war with Iran was very much in its infancy.

Since then oil and gas prices have soared.

In today's freshly-published Economic and Fiscal Outlook, the OBR now expects inflation to reach 3.1% this year, ahead of a previous forecast for 2.3%.

That will rise to 3.4% in 2027 and will only return to the Bank of England's 2% target in 2030.

In March, it reckoned UK inflation would drift back down to 2% by next year and stay there.

Inflation "is eating away at our standard of living", says Badenoch.

She says that Labour "have looked after their people" and says there have been "plenty of pay rises for the unions" and that benefits will go up by inflation in April but private sector wages this year are below inflation.

"Those on benefits are getting an increase, while those going out to work will not," she says. "That is not fair."

She accuses Labour of being "addicted to spending other people's money" and "addicted to welfare".

She quips that "just because it's called Universal Credit" doesn't mean that "everyone in the universe" should be on benefits.

Image source, House of Commons

Badenoch keeps pressing on defence and says there are huge problems coming down the road.

She mentions Healey's previous comments he made after resigning as defence secretary earlier this year, describing him at the time as "a man of principle".

Badenoch says Healey should have set out a plan for reaching the commitment to spend 3% of GDP on defence by 2030 today, but says he has failed to do so.

What we have is a plan to have a plan, she adds.

She acknowledges that finding money for defence is difficult, "but it can be done".

She criticises today's Budget for relying on "more borrowing" to fund defence, and says the Conservatives have "found the savings" to get defence spending to 3%.

Image source, House of Commons

Whilst Kemi Badenoch is responding in the House of Commons, here's a reminder of what we heard from Chancellor John Healey just now:

Income and savings

• Pensioners with income up to the value of the full new state pension will not pay income tax "in this Parliament"
• The national minimum wage and national living wage will increase by 3.9% for 2.3 million workers
• A cut to the tax-free cash ISA limit will not go ahead, remaining at £20,000 annually

Business

• The threshold for small business rate relief for retail hospitality and leisure businesses will be raised from £12,000 to £18,000 - stopping 70,000 businesses from paying them altogether, Healey says
• All business rates will be retained locally by the end of the decade with 20% of revenue going to mayors from next year
• There will be a temporary rise in the bank surcharge on their profits, from 3% to 6%, with the increase starting in January and lasting 15 months

Energy and fuel

• The VAT cut on electricity, which had been expected to end in March 2027, will be extended to July - taking "£50 off the annual price cap", Healey says
• The removal of the gas standing charge will come into effect "from next year" - there will be "similar reforms to follow" for electricity
• Twenty million households in council tax bands A-D will receive a £100 "household energy payment" this winter - paid directly into bank accounts
• There will be a further extension of the 5p fuel duty cut until next July

Housing

• A further £430 million to offer rough sleepers a route off the streets
• All land sold to social housing providers will be VAT-free, and there will be an additional £1.5bn for the social and affordable housing programme
• A First Time Buyer ISA will replace the Lifetime ISA

Michael Race
Business and economics reporter

The markets have been closely watching John Healey's tax and spending announcements this afternoon, and so far the reaction will be welcomed by the Treasury.

Government borrowing costs over 10 years have fallen slightly in the past hour. The rate on 10-year borrowing for the UK was 5.34% around the time Healey started talking, they are now 5.31%.

However, there is still a lot of digesting to be done on what policies announced mean in practice, as well as the assessment of the tax and spending plans by the government's forecaster, the OBR, to come.

Badenoch says most people in the country listening to the Budget will thinking to themselves: "Is that it?"

She says Burnham arrived in Downing Street "promising to reverse 40 years of neo-liberalism" but instead "we got 4p off gherkins".

She says the headline is the same as every other Labour budget, "more borrowing, more tax rises and -surprise surprise - more money on benefits".

Badenoch says Labour MPs "do not understand" why it is a problem that "a quarter of all working age adults are now claiming benefits".

If Russia launches attack on Nato in the next three years, Badenoch says the UK will be at war without the means to properly defend itself.

"You can't have social security without national security," she says, adding: "There are huge problems coming down the road but this Budget is simply trying to get through the day."

Badenoch says there are "some things" in the Budget that she'll welcome.

She says if he had listened to some of his colleague's call to raise Capital Gains Tax (CGT), more wealth creators would leave the UK.

The Tory leader also thanks the chancellor for "breaking Labour's pledge on the minimum wage for young people" and welcomes his "U-turn on ISAs".

She asks why the fuel duty freeze will go up in July. "They can do better than that," she says.

What is Capital Gains Tax (CGT)? CGT is a tax on profits when you sell assets like property, shares or personal possessions.

Image source, House of Commons

After saying the chancellor has a "big job to do", Badenoch continues adding that "this Budget fails to do it".

She says it comes at a time of "grave economic danger" and that this government has "put welfare first".

She says it is "simply not enough" - suggesting Britain has "no resilience" and is "not ready to meet the national security threats of today".

Badenoch adds that "we all know" why he has delayed the "difficult decisions" - because Burnham wants to keep the option of holding an early general election.

Badenoch says next year, under Labour, the UK's tax burden will be "the highest in our country's history".

And - she goes on - "our benefits bill is going up by tens of billions of pounds".

"Because this government has put welfare first. We are overspent, overborrowed and overtaxed and drowning in an out-of-control welfare system. And this is his answer? It is simply not enough."

Leader of the Opposition Kemi Badenoch is now responding to the Budget statement we just heard.

Noting that that this is Labour's third Budget in office, this time with a new chancellor, she references a "term in rugby called a 'hospital pass' which she says "sums up the inheritance [Healey] received from his predecessor".

Badenoch says she had predicted last year that Reeves's Budget would be her last: "I was right".

Healey has "got a big job to do, cleaning up her mess", she adds.

Image source, House of Commons

John Healey is congratulated by Labour MPs as he finishes delivering his Budget.

We're now hearing from Conservative leader Kemi Badenoch.

Image source, House of Commons

Healey announces that a First Time Buyer ISA will replace the Lifetime ISA.

He also pledges to deal with the Lisa penalty, so that if the home you want costs more than the limit, you'll get back "at least what you put in".

The chancellor also announces the Your First Home Scheme, new to first-time buyers who "don't have the bank of mum and dad behind them".

From next Spring, the scheme - widely trailed - is an equity loan scheme he is funding with £4.7bn of government-backed lending.

It is expected to be open to first-time buyers with a deposit of 2.5% and provide buyers with an equity loan worth 20% of the value of the new build property.

The chancellor now moves on to talk about the issue of housing.

He refers to how the Tories had planned to end rough sleeping during their time in power, "yet when they left office, it had doubled".

The government has already promised that everyone sleeping rough will be offered a route "off the streets this winter", Healey says.

He goes on: "Today, I confirm a further £430m to keep that offer open for the rest of this parliament."

The chancellor describes this as a "moral mission", and goes on to say that "home is the heart of all our lives".

Rough sleeping, he says, is the "sharp end".

Healey adds: "Since the 1980s, Britain has lost over 2 million council homes. Tonight, more than 170,000 children will go to sleep in temporary accommodation."

The Tories sold off council housing, Healey says, but Labour is "building is back".

Healey moves on to defence, saying the defence budget is £14bn higher than it was in the Conservative’s last year of government.

He adds that he will set out how he will meet the UK's Nato commitment to spend 3.5% of GDP on defence by 2035 in next year's spending review.

Healey also announces the launch of a new innovative defence finance taskforce that will look at how to achieve this.

He adds the government is also increasing private investment into defence including by public private partnerships.

As a reminder, Nato members last year committed to investing 5% of GDP in defence - that includes at least 3.5% on "core defence" and up to 1.5% on "defence and security-related spending", which can include things like protecting critical infrastructure.

On Ukraine, Healey says he and Burnham called President Zelensky earlier this morning to inform him of the support that would be announced today.

"He told us 'you've made my day'," says Healey.

He announces £10bn of additional "economic and military support" including "half a billion in urgent military funding for this winter".

Britain will stand with Ukraine "as long as it takes", the chancellor adds.

Kevin Peachey
Cost of living correspondent

The chancellor said 20 million homes in council tax bands A to D in England will receive a cost-of-energy payment.

It has clearly prompted a surge of people checking their tax band on the government’s own service, external – because it isn’t working very well at the moment.

You can also find your band on your annual council tax bill.

Healey moves on to the government's approach to welfare, pointing out his refusal to write off young people not in employment, education and training (Neets), and disabled people.

He references the upcoming Milburn report, which addresses Neets.

The chancellor confirms adjustment to the triple lock and the establishment of the new National Care Service.

"This will save £15bn a year by the end of the 2030s, £50bn by 2050," he says.

A rising state pension and national care service will together be there for when older people need it, "taking the burden off families, taken the burden off our NHS," Healey adds.

What is the triple lock? This measure ensures the value of the state pension rises each year, either in line with inflation, average wage growth, or by 2.5% - whichever is highest. Andy Burnham has pledged to reform it to help fund a new national care service.