Last week, the Chancellor delivered the Autumn Budget and Spending Review, setting out how the Government will deliver a stronger economy as we build back better from the pandemic.
The Chancellor’s announcements come in the midst of our recovery from a period of unparalleled global economic uncertainty. Indeed, one year ago, we were in the grip of the biggest recession in 300 years, but, thanks to the Government’s Plan for Jobs, we are today recovering faster than our major competitors, with employment up, investment growing, public services improving, public finances stabilising, and wages rising. However, uncertainty in the global economy means that our recovery is now under threat.
As such, the Budget and Spending Review centred on investing in a more innovative, high-skill economy, levelling up every part of the UK and providing the foundations for a stronger economy by:
- Helping working families meet the cost of living, and supporting vulnerable households;
- Supporting businesses with post-Brexit tax reforms, tax cuts and incentives to invest;
- Delivering stronger public services across all government departments;
- Driving economic growth by investing in infrastructure, innovation and skills; and
- Strengthening public finances, ensuring debt is falling again and rebuilding our resilience.
I hope that the following summary of the Chancellor's key announcements is helpful to local residents.
Key points on the economy:
- Growth this year is revised up from 4% to 6.5%, and is expected to be 6% in 2022, 2.1% in 2023, 1.3% in 2024, and 1.6% in 2025.
- Unemployment is revised down from a peak of 11.9% to 5.2%.
- Wages are rising, having grown in real terms by 3.4% since February 2020.
- Inflation in September was 3.1%, with CPI expected to average over 4% next year.
- Debt is forecast to be 85.2% of GDP this year and 85.4% in 2022-23, before peaking at 85.7% in 2023-24.
- Borrowing as a percentage of GDP is forecast to fall in every single year from 7.9% this year to 3.3% in 2022/23, 2.4% in 2023/24, 1.7% in 2024/25, 1.7% in 2025/26 and 1.5% in 2026/27.
Helping working families meet the cost of living
To achieve this, the Government is:
- Reducing the Universal Credit taper rate by 8p, taking it down from the current 63p to 55p, and increasing the Work Allowance by £500. This will be introduced no later than 1st December 2021, and represents a tax cut for 2 million low-income families worth £2.2 billion next year and an extra £1,000 in their pocket.
- Raising the National Living Wage by 6.6% to £9.50, giving a £1,000 pay rise to 2 million of the lowest paid.
- Increasing pay for public sector workers following a period of more targeted pay.
- Freezing fuel duty for the twelfth year in a row, providing a £1.5 billion tax cut for motorists, meaning the average driver has saved £1,900 since 2010.
- Freezing alcohol duty for the third year in a row and radically reforming the system to make it simpler, fairer and healthier. The number of alcohol bands will be reduced from 15 to just 6, based around taxing alcoholic content. This means the price of English sparkling wine and prosecco will be cut by as much as 64p, and the price of draught fruit ciders by 20%. Until this new system is in place, all alcohol duties will be frozen, representing a tax cut for families, worth £500 million every year. A consultation has been launched on the new alcohol duty system.
- Cutting beer duty by 3p for a pint in a pub through a new Draught Relief, which will apply a lower rate of duty on draught beer and cider, cutting duty by 5% - the biggest cut to cider duty since 1923 and the biggest cut to beer duty for 50 years. This will boost British pubs by nearly £100 million a year.
- Creating a new, half price rate of Air Passenger Duty for domestic flights within the UK. From April 2023, flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of APD than international flights, cutting duty by half for 9 million passengers. A new ultra long-haul band will also be introduced for the 5% of passengers travelling the furthest.
To achieve this, the Government is:
- Cutting business rates by 50% next year for some business and freezing all rates. 90% of retail, hospitality and leisure will be eligible for a 50% discount on their bills next year, up to a maximum of £110,000 per business. Taken together with Small Business Rates Relief, this represents a business tax cut worth £7 billion for over 700,000 eligible businesses. Next year’s planned increase in the business rates multiplier will also be cancelled, providing a tax cut worth £4.6 billion.
- Creating a new business rates green/growth tax relief and extending the Annual Investment Allowance. The new relief represents a £750 million tax cut on investment. The £1 million Annual Investment Allowance will also be extended for a further 15 months.
- Reforming tonnage tax so British merchant ships are rewarded for flying the Union Jack.
- Immediately doubling creative industries tax reliefs for theatres, orchestras, museums and galleries until April 2024, representing a tax cut for culture worth almost £250 million.
- Extending business rates relief for all regional airports in England through the Airport & Ground Operations Support Scheme by a further six months, which is equivalent to a full business rates holiday for almost all regional airports.
- Retaining a corporation tax surcharge of 3% for banks, meaning that the overall rate will increase from 27% to 28% in 2021 – higher than the standard 25% paid by others. The annual allowance is also being raised to £100 million to support competition, consumers and challenger banks.
Delivering stronger public services
To achieve this, the Government is increasing total departmental spending by £150 billion by 2024, which is an annual increase of 3.8% in real terms, representing the largest real terms increase this century, and record levels of capital investment not seen in 50 years. This will be spent on:
- Health - delivering 40 new hospitals, 70 hospital upgrades, 100 new community diagnostic centres, including 10 in the Midlands, 50,000 more nurses, 50 million primary care appointments, record investment in R&D, obesity programmes and significant capital investment in operating theatres to help catch up on elective backlogs.
- Schools - providing another £4.7 billion per year by 2024 to lift real terms per pupil spending to historic 2010 levels – a cash uplift of over £1,500 per pupil – and tripling annual spending on Special Educational Needs places, providing a further £1.8 billion to take the total for schools catch-up funding to almost £5 billion.
- Early years - providing £300 million for a new Start for Life offer, programmes for new parents, a new network of Family Hubs, an extra £170 million for childcare providers, £150 million to support training and development for the early years workforce, and an extra £200 million for the Supporting Families programme.
- Crime and Justice - delivering 20,000 new police officers, providing an extra £2.2 billion in courts, prisons and probation services, including £500 million to clear court backlogs, funding programmes to tackle neighbourhood crime, reoffending, county lines, and violence against women and girls, and committing £3.8 billion over the next three years to the largest prison-building programme in a generation.
- Local government - providing councils with a new annual grant of £1.6 billion on top of their existing funding to implement social care reforms, allowing them to keep council tax increases at the lowest levels in years.
- Housing - providing a multi-year settlement worth nearly £24 billion, including £11.5 billion for 180,000 new affordable homes and an extra £1.8 billion to bring 1,500 hectares of brownfield land into use, £5 billion to remove unsafe cladding from the highest risk buildings and £640 million a year to tackle rough sleeping.
- Environment - providing £2.4 billion for farm support, £250 million for biodiversity loss and more than £750 million for the Nature for Climate Fund by 2024/25, including £7 million for the National Forest to support woodland creation in the East Midlands.
- Communities - investing in local services, including £560 million for youth services over the next five years, over £200 million to build or transform up to 8,000 community football pitches, funding for over 100 new pocket parks, and £850 million for museums, galleries and creative industries. The East Midlands is set to receive £203 million for 10 projects from the first tranche of funding allocations.
Driving economic growth
To achieve this, the Government is:
- Investing £100 billion in infrastructure, including £16 billion on roads, more than £35 billion on railways, £5 billion for buses, cycling and walking, and £1.2 billion on gigabit-capable broadband. The East Midland will receive over £342 million over the next 3 years, which is enough to fill over 4 million potholes, and over £75 million for smaller transport improvement priorities through the Integrated Transport Block.
- Boosting innovation by spending £20 billion a year on R&D by 2024-25, expanding the scope of R&D tax reliefs to include cloud computing and data costs and redesigning it to incentivise businesses to do more research and development in the UK, increasing regional financing to help businesses innovate and grow, including £400 billion for British Business Bank’s new Midlands Engine Investment Fund and a £1.4 billion Global Britain Investment Fund, and introducing a Scale-Up Visa for international talent and a Global Talent Network to help make it easier and quicker for fast-growing businesses to hire highly-skilled individuals.
- Increasing overall skills spending by £3.8 billion over this Parliament – a real terms increase of 26% - which will be spent on more hours learning for 16-19 year olds, expanding T Levels, more traineeships and apprenticeships, building Institutes of Technology, funding the Lifetime Skills Guarantee, upgrading the further education college estate, quadrupling the number of places on skills bootcamps, and a new numeracy programme, Multiply, to improve the basic maths skills of over half a million adults.
Strengthening public finances
To achieve this, the Government is introducing a new Charter for Budget Responsibility, with two new fiscal rules to ensure discipline with the public finances:
- underlying public sector debt as a percentage of GDP must be falling; and
- government should only borrow to invest in capital projects.
If you would like to read the Budget documents, they can be found here.
You can watch the Chancellor’s speech here.
If you would like any further information about anything I have mentioned above, please do send me an email at: email@example.com