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The Autumn Budget announced today saw Rishi Sunak setting out the Government’s spending and financial strategy. He outlined several measures to balance the books after billions that had been spent during the Covid-19 pandemic. Before getting to the Budget itself, he announced a new Charter for Budget Responsibility to strengthen public finances, with two fiscal rules:
— that underlying net debt must, as a percentage of GDP, be falling;
He said that everyday spending must be met by taxation — the country should only borrow to invest in growth.
From business rates changes to Universal Credit changes, this is a Budget that tries to balance optimism with pragmatism to help the UK economy build back more robust in the years to come.
Against a backdrop of the national debt – according to the ONS, the UK general Government gross debt was £2,224.5 billion at the end of the financial year ending March 2021, equivalent to 106.0% of gross domestic product (GDP). By comparison, this is 13.1 percentage points above the average of the 27 European Union (EU) member states. The Chancellor said that the inflation rate was 3.1% in September “and is likely to rise further”. The OBR expects the CPI measure of inflation to average 4% over the next year.
Given this context, the Chancellor’s pragmatic approach in this Budget. The reality is the unprecedented levels of COVID financial support needs to be paid for.
In addition, wage rises, staff shortages and energy price hikes are contributing to an uncertain environment. A month after furlough schemes have come to an end, The Guardian has projected that 1 in 16 UK firms could face closure as a result. There will be a difficult few months ahead, and small businesses need confidence to thrive. A glimmer of hope came from The Office for Budget Responsibility (OBR) which has lifted its predictions for economic growth in 2021 to 6.5%, up from its previous forecast of 4%.
Help for businesses came in various guises with the hospitality, retail and leisure sectors; all hit hard during the pandemic, will be given a 50% discount on business rates for one year, including pubs, music venues, cinemas, restaurants, hotels, theatres and gyms. Overall, it’s a tax cut worth £1.78bn. In addition, the business rates system will be made fairer by re-evaluation being made every three years, and a new investment relief will encourage investment in technologies like solar panels.
The Chancellor also said: “Without action, millions of businesses would see their tax bills going up next year because of inflation. So I’ve decided that next year’s planned increase in the multiplier will be cancelled. That’s a tax cut for business worth £4.6bn over the next five years.”
The Government is also introducing a new relief to support green technologies — until 2035, plants and machinery used onsite for renewable energy will be exempt from business rates altogether. It’s expected that further measures to help businesses grow – such as March’s capital allowances super deduction – will be announced by the Chancellor this time around.
Grants worth £1.4bn will be given to “internationally mobile” companies to invest in UK infrastructure.
This includes £345m to increase resilience for future pandemics and £800m for producing electric vehicles in northeast England and the Midlands.
As part of the package, a talent network team will attract high-skilled workers to the UK through “innovation hotspots” initially based in San Francisco and Boston in the US and Bengaluru in India.
The Chancellor also announced a 5% cut to the tax on pulled pints in the Autumn Budget – the most significant cut to beer duty for 50 years.
The Government has announced £500m to support parents and children in England.
Mr Sunak announced a rise in the National Living Wage from £8.91 per hour to £9.50, to come into effect from 1 April next year.
This is a 6.6% increase in the minimum wage for all those aged 23 and over – more than twice the current 3.1% rise in the cost of living.
Assuming a 40 hour week, the new minimum wage amounts to a salary of £1,646 per month or £19,760 a year.
The wage rates increase follows recommendations made by the Low Pay Commission, an independent advisory board.
The Treasury has also announced it will be lifting a pay freeze imposed on millions of public sector workers last year due to the pandemic.
Independent pay review bodies will recommend how much extra money workers will get early next year.
The Government is setting aside £2.6bn to fund more than 50 local road upgrades.
Chancellor Rishi Sunak announced more investment in transport infrastructure was needed to connect regions better. As part of this, the £2.6bn will be invested in a “long-term pipeline” for more than 50 local road upgrade projects. In addition, more than £5bn will be made available for local roads maintenance works, enough to repair an extra one million potholes per year, the Chancellor claimed.
Sunak highlighted the £130bn national infrastructure strategy to invest in transport and communication links. But there was no sign of the Integrated Rail Plan in the announcement. The Chancellor said the plan, which is expected to clarify the future of HS2 phase 2b alongside other major northern rail projects, would be published “soon”.
The Government will invest almost £2bn into building new homes on derelict or unused land in England, and the Chancellor is expected to announce in Wednesday’s Budget.
The Government said 160,000 greener homes could be built on brownfield land the size of 2,000 football pitches.
It also pledged to invest £9m towards 100 urban “pocket parks” across the UK.
UK REIT regime to make the UK a more attractive market for international investors.1
Given the upcoming COP26 summit, the changes to Air Passenger Duty (APD) – flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty (APD) from April 2023.
APD is charged per passenger flying from a UK airport domestically and abroad and is currently £13 per passenger for short-haul flights and £82 long-haul; the new ultra long haul band in Air Passenger Duty for flights of over 5,500 miles will be introduced from April 2023. Financial support for English airports to be extended for a further six months
This cut is good news for regional airports, but will the move encourage more flying internally when we’re supposed to be cutting carbon emissions?
The Government announced that England’s city regions would receive £6.9bn to spend on train, tram, bus and cycle projects. This includes £1.07bn for Greater Manchester, £1.05bn for the West Midlands and £830m for West Yorkshire. However, the figure of £6.9bn only includes £1.5bn of additional spending because the Government consists of the £4.2bn promised in 2019 alongside funding for buses announced by the prime minister last year.
The Chancellor has refused to be drawn on the future of the eastern leg of High Speed Two, which could be delayed or cancelled to save an estimated £40bn. If built, the extension would cut journey times between London and the North East by 31 minutes. It would also shave 52 minutes off trips between London and Leeds.
Scotland, Wales and Northern Ireland will also receive extra funding through the Barnett formula – a mechanism the UK government uses to allocate additional money to the devolved nations when it spends more in England.
The Chancellor announced that funding per pupil in England’s schools would be restored to 2010 levels over the next three years. This means an extra £4.7bn for schools in England by 2024-2025 and a cash increase for every child of £1,500, Rishi Sunak said.
The Chancellor also announced ‘Multiply’, a new £560 million numeracy scheme to support 500,000 adults with low numeracy. This is fantastic news for the country, economy, employers and – most importantly – the millions of adults held back in life through low numeracy. Details for the national numeracy challenge can be found here Getting on With Numbers | National Numeracy Challenge
The Chancellor announced £300m will be spent on a “Start for Life” parenting programme, with an additional £170m by 2024-25 promised for childcare.
£2.6bn will be spent creating 30,000 new school places for children with special educational needs and disabilities.
The money will also improve school buildings’ accessibility and fund a special provision in free schools in England.
The Budget will also include £1.6bn over three years to roll out new T-levels for 16 to 19-year-olds plus £550m for adult skills in England.
There are over 6,000 on T-level courses, but the Government hopes to ramp up those numbers.
The Government will also spend a further £830m modernising colleges in England.
NHS England will get £5.9bn to tackle the backlog of people waiting for tests and scans. That covers £2.3bn for diagnostic tests, including clinics in shopping centres for scans; £1.5bn on beds equipment and new “surgical hubs”; and £2.1bn to improve IT.
Health bodies welcomed the money but warned it would not solve the problem of staff shortages. According to data published by NHS digital, there were 93,806 full-time vacancies across the NHS in England in June.
The health department will get £5bn over the next three years for research and development.
This includes £95m, which will research methods for treating cancer, obesity and mental health.
The money will also be spent developing genome technology that could detect more than 200 conditions in newborn babies.
This includes £200m to support families with complex issues; £82m to fund centres in 75 different areas to provide advice for parents; £100m for mental health support for expectant parents; and £50m for breastfeeding support.
Labour has argued that the Government previously closed over 1,000 children’s centres – known as Sure Start centres – and this new announcement “rings hollow”.
Mr Sunak defended past cuts, arguing that the new funding would “create a network of family hubs which are broader than the Sure Start centres”.
A full copy of the Budget document can be found here: Autumn Budget and Spending Review 2021: A Stronger Economy for the British People (publishing.service.gov.uk)
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