The Autumn Budget 2021 was billed as a Budget for a new age and so here’s everything Rishi Sunak, the Chancellor announced today:
Economic forecasts and fiscal rules
- The OBR has delivered good news on the economic and borrowing outlook after a stronger-than-expected recovery from the Covid blow.
- The fiscal watchdog said growth will come in stronger than expected in 2021 and 2022, slashing the amount Mr Sunak will need to borrow. GDP will rise 6.5% this year (up from its prediction of 4% in March) and climb 6% in 2022 while unemployment will peak at 5.2%. GDP will return to pre-Covid levels by the turn of the year.
- The OBR also reduced its estimates for the economy’s longer-term scarring from 3% to 2%. That should give the Chancellor more wiggle room on spending in the future.
- Borrowing will fall from 7.9% of GDP this year to 3.3% in 2022 and then 2.4% in 2023, the OBR estimated.
- The OBR expects CPI to average 4% over the next year. Mr Sunak said the “majority of this rise in inflation can be explained by two global forces”, such as demand for goods and energy. He warned it will take months for the problems to fade.
- The Chancellor also set out two new fiscal rules to stabilise the public finances following the Covid blow. Public debt must, as a percentage of GDP, be falling within three years, while day-to-day spending must be paid through taxes rather than borrowing.
- Mr Sunak vowed to reduce tax by the end this Parliament as he unveiled a cut to the Universal Credit Taper. The taper rate – which cuts state support as people work more hours – will be reduced from 63% to 55% – a boost for low income households worth £2 billion. Mr Sunak claimed it would save almost 2 million families an extra £1,000 per year on average.
- The Chancellor announced another freeze to fuel duty after petrol prices hit a record high this week, a blow to the UK’s green credentials ahead of the COP26 summit.
- A planned increase in alcohol duty will be cancelled. Alcohol taxes have also been simplified, with 15 main duty rates being reduced to six. Stronger alcohol will be taxed more heavily, with red wines, fortified wines or high-strength ciders facing a higher rate.
- Mr Sunak also unveiled a new “draught relief”, a lower rate of duty on draught beer and cider that will cut the price of a pint by 3 pence.
- Firms in the retail, hospitality and leisure sectors will be able to benefit from another year of business rates relief. They will be able to claim a 50% discount on their bills at up to £100,000, a tax break worth £1.7 billion.
- He also announced other tweaks to business rates. There will be more frequent revaluations every three years while there will be a relief on investments in green technologies.
- The rate of air passenger duty will be lowered on domestic flights from April 2023. However, there will be a new ultra-long haul in air passenger duty, covering flights of over 5,500 miles.
- Mr Sunak announced that the £1 million annual investment allowance was extended from the end of the year to March 2023.
- The bank surcharge has been slashed to 3% but the overall corporate tax rate faced by the sector will increase from 27% to 28%.
- Total department spending will rise by 3.8% a year in real terms over this Parliament, a £150 billion boost for Whitehall.
- Health care spending will increase by £44 billion to over £177 billon by the end of this Parliament with the recent national insurance hike boosting NHS and social scare funding.
- International aid spending is on track to return to 0.7% of GDP in 2024-25 following the controversial cut during the pandemic, Mr Sunak claimed.
- The Chancellor said public investment as a share of GDP will be at the highest sustained level for nearly half a century.
- He confirmed £5 billion to remove unsafe cladding on high-rise flats, partly funded by a Residential Property Developers Tax – a 4% levy on developers’ profits over £25 million.
- Schools will receive an extra £4.7 billion by 2024-25, helping per pupil funding return to 2010 levels in real terms. An extra £2 billion will help catch-up funding reach £5 billion, the Chancellor said.
- Mr Sunak revealed that Scottish government funding will increase by an average of £4.6 billion per year while administrations in Wales and Northern Ireland will receive an extra £2.5 billion and £1.6 billion, respectively. He also allocated grants from the £1.7 billion Levelling Up Fund to a number of towns and cities.
- Metro mayors will receive £5.7 billion for “London-style transport settlements” while £2.6 billion will be spent on potholes and more than £5 billion has been earmarked for roads maintenance.
- He confirmed that the Government will hit its target to boost research and development (R&D) funding to £22 billion. It will increase “core science funding” to £5.9 billion a year by 2024-25.
- The Chancellor confirmed that the National Living Wage will rise to £9.50 an hour, up from its current level of £8.91 – a 6.6% rise, or an increase of £1,000 a year for a full-time worker. More than 2 million people will benefit, and the hike puts the National Living Wage on track to reach two-thirds of median earnings by 2024.
- The Chancellor announced pay rises for around five million public sector workers, following the freeze in pay (excluding NHS and lower paid public servants) during the pandemic.
Investment and skills
- Mr Sunak confirmed that £1.4 billion will be set aside for a Global Britain Investment Fund to help lure in foreign investment. The British Business Bank’s regional financing programmes will be increased to £1.6 billion.
- The Chancellor expanded R&D tax credits to help encourage investment in cloud computing and data costs. He added he will look at ensuring investment from the tax break is spent in the UK rather than overseas.
- The Treasury is increasing spending on skills by £3.8 billion over this Parliament, a 38% rise. It will include a £560 million Multiply programme to improve adults’ basic maths skills.
Giving her reaction to the Chancellor’s budget, Shevaun Haviland, Director General of the BCC, said:
“There is much to welcome in this Budget for business communities across the UK.
The Chancellor has listened to Chambers’ long-standing calls for changes to the business rates system and this will be good news for many firms. This will provide much needed relief for businesses across the country, giving many firms renewed confidence to invest and grow.
Additional investment in skills, infrastructure and better access to finance will be key drivers for our economic recovery and will provide longer-term benefits and opportunities for businesses across the country.
Businesses have been battered by 18 months of the pandemic and problems around supply chain costs and disruption, labour shortages, price rises, soaring energy bills and taxes and there may still be difficult months ahead. If firms face unexpected bumps in the road, the Chancellor must be prepared to take further action to enable the economy to fire on all cylinders again.”