Rishi Sunak has begun setting out his plans to create an economy “fit for a new age of optimism” – revealing measures to boost wages, skills and productivity as the UK recovers from the Covid crisis.
The chancellor was under pressure to ease the cost-of-living concerns of families facing rising bills, ease the burden on struggling businesses, and provide much-needed investment in the NHS and public services.
So what has Mr Sunak offered in his autumn Budget and spending review? The Independent takes a look at the key announcements.
Mr Sunak announced measures to help universal credit claimants by allowing them to keep more of the benefit as they earn more. The “taper rate” – the amount of benefit taken away for every £1 earned above the claimant’s work allowance – will be reduced from 63p to 55p.
The chancellor claimed it amounted to a “£2bn tax cut” for low-income families, and promised the changes would come into force within weeks.
While this will ease the burden on claimants who are in work, it does not compensate for the £20-a-week cut the government made earlier this month (worth £6bn), or do anything to help people who are not in work.
Air passenger duty
Flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of air passenger duty from April next year – sparking criticism from climate campaigners hoping for measures that would help to reduce aviation emissions.
However, a new “ultra-long-haul band” covering flights of over 5,500 miles means long-haul flyers will pay slightly more. “Less than 5 per cent of passengers will pay more – but those who fly furthest will pay the most,” Mr Sunak said.
Mr Sunak said the planned fuel duty rise would be cancelled – so it will remain frozen at 57.95p a litre until next year. “With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses,” said Mr Sunak.
Mr Sunak announced some changes to business rates. A new 50 per cent business rates discount will apply in the retail, hospitality, and leisure sectors, with eligible businesses able to claim a discount on their bills, up to a maximum of £110,000.
There will also be more frequent revaluations every three years from 2023, a 12-month rate holiday on property improvements, and relief for business owners who install solar panels.
It falls short of the across-the-board cut to business rates that many Tory MPs had been looking for, while Labour has called for a complete overhaul of the system.
A planned increase in duty on spirits, beer and wines will be cancelled, said Mr Sunak – claiming it amounts to a £3bn tax cut for the hospitality industry. The chancellor said a 5 per cent cut in tax on pints pulled in pubs would reduce the cost of a pint by 3p.
Mr Sunak said he would simplify the system of alcohol duties from 15 duty rates to just six – promising lower rates for lower-strength drinks such as rose, fruit ciders, and lower-strength beers. But he said some higher-strength drinks would see higher rates. “The stronger the drink, the higher the rate,” he said.
Mr Sunak has promised an extra £4.7bn for England’s schools by 2024-25, saying just under £2bn of the new funding would go to help schools and colleges recover from the pandemic.
The chancellor said that the government’s funding plans would mean spending for each pupil would finally return to 2010 levels, and also announced an extra £200m to continue the holiday activities scheme.
Minimum wage and public sector pay
The chancellor announced ahead of the Budget that he had accepted a recommendation from the Low Pay Commission to increase the national living wage from £8.91 to £9.50 an hour for workers aged 23 and over.
Mr Sunak also ended the year-long public sector pay freeze, but did not reveal whether the pay rises would be above inflation (currently 3.1 per cent). He claimed there would be “fair and affordable pay rises” – but said it would be up to pay-review bodies to decide on the amounts.
Every Whitehall department will receive a “real terms rise in overall spending” as part of the spending review, the chancellor said, amounting to £150bn over the course of this parliament.
In another pre-Budget announcement, an additional £5.9bn will go to the NHS to tackle the huge backlog in care following the Covid crisis – with investment in diagnostic services, surgical hubs, and boosting bed capacity.
Although £3.8bn of the extra spending will be aimed directly at getting the health service “back on track”, some £2.1bn will go on “digitising” the NHS – as the government attempts to push the health service into an efficiency drive.
The government has topped up a pledge to increase funding for trams, trains, buses and cycleways in a bid to improve local transport across England.
But only a small share of the £7bn for transport touted by the Treasury before the Budget is new money – around £1.5bn is additional funding, with most of the sum being accounted for in previous commitments.
Big construction companies will be charged an extra levy to raise a £5bn fund to remove unsafe cladding from highrise buildings. Developers with profits over £25m will be charged a rate of 4 per cent.
The chancellor also announced £11.5bn to build up to 180,000 affordable homes, and an extra £1.8bn to bring 1,500 hectares of brownfield land into use.
But James Forrester, managing director of estate agent Barrows and Forrester, accused the chancellor of “recycling” old commitments.
Levelling up agenda
The chancellor announced he was allocating £1.7bn of funding from the levelling up fund for over 100 local areas, including disadvantaged communities in the north of England and the Midlands.
Rejecting Labour claims of “pork-barrel politics” for Tory-held seats, Mr Sunak said the money would go to Labour constituencies. “We’re so committed to levelling up we’re even levelling up the opposition front bench,” he said.
Meanwhile, devolved administrations will be given the “largest block grants” since 1998, he added, with an increase to Scottish government funding in each year by an average of £4.6bn, along with £2.5bn for the Welsh government and £1.6bn for the Northern Ireland executive.
Local government and council tax
Mr Sunak’s Budget provides English councils with £1.6bn of new grant funding in each of the next three years – £4.8bn in all – on top of previous funding to implement social care reform plans.
Local authorities will be able to increase council tax by 2 per cent per year over the next three years without holding a referendum, according to the chancellor’s spending review.
Those with social care responsibilities will be able to raise council tax by an additional 1 per cent per year, meaning upper tier councils will be able to increase bills by 3 per cent per year for the next three years.
Growth, borrowing and spending
The chancellor said that OBR forecasts show that the UK economy will grow by 6.5 per cent this year – followed by lower growth of 2.1 per cent in 2023, 1.3 per cent in 2024, and 1.6 per cent in 2025.
But inflation is expected to spike to 4 per cent next year, Mr Sunak revealed – as the economy struggles to keep up with demand in the wake of Covid and Brexit. He admitted Britain’s supply-chain woes would take “months to ease”.
Mr Sunak has also set out new fiscal rules: that debt must fall as a percentage of GDP, and the government should only borrow to invest in future growth once the pandemic has passed and the country returns to “normal times”.
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