Published: 28 October 2021
Location: London, UK
Chancellor Rishi Sunak increased total departmental spending by £150bn, the largest rise in the last century, with spending growing by 3.8% a year in real terms. This means Britain is now on course for its biggest tax burden since the 1950s, despite a goal to cut taxes by the end of the Parliament. "Taking his March and October Budgets together, the chancellor has raised taxes by more this year than in any single year since Norman Lamont and Ken Clarke’s two 1993 Budgets in the aftermath of Black Wednesday,” The Office for Budget Responsibility (OBR) said yesterday.
Borrowing as a percentage of GDP is forecast to fall from 7.9% this year to 3.3% next year. Borrowing as a percentage of GDP will then fall in the following four years to 1.5%
The forecast for UK economic growth has been lifted. Gross domestic product (GDP) is now expected to expand by 6.5% this year and 6% in 2022 compared to the 4% forecast at the Budget in March.
The Chancellor acknowledged that inflation, currently at 3.1%, is likely to rise further to average 4% over the next year.
Unemployment is expected to peak at 5.2% next year, lower than 11.9% predicted previously.
The national living wage will increase to £9.50 in April 2022.
The freeze on public sector pay has been lifted.
The personal allowance will be frozen at £12,570 until 2025/26. The higher-rate threshold will also be frozen at £50,270.
National insurance will rise by 1.25 percentage points in April, to 13.25% on earnings between £9,564 and £50,268, and 3.25% on earnings above this.
Dividend tax will also rise by 1.25% to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.
The Universal Credit taper is to be cut from 63%, to 55% no later than 1stDecember. This means for every extra £1 earned, 55p of universal credit will be withdrawn. Along with increasing the work allowance by £500, overall, 1.9 million people will save over £2 billion, according to Hargreaves Lansdown.
A new residential property developers’ tax, at 4% of profits over £25m will be fed into a £5bn fund to help pay for the removal of unsafe cladding on the highest risk buildings.
There will be consultations on a new online sales tax and changes to the regulatory charge cap for pension schemes, put in place in 2016 to prevent retirement pots being diminished by higher charges by providers.
Business rates will be cut by 50% for the hospitality, retail and leisure sectors, subject to a £110,000 cash cap per business. Pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all eligible. Overall, this is a tax cut worth £1.78bn the biggest single-year cut to business rates in 30 years, outside of emergency COVID-19 reliefs. Sunak also announced business rates will be re-evaluated every three years and a new investment relief will encourage investment in technologies like solar panels.
Alcohol duty will be cut by 5% on draught beer and cider, in a £100m move to support pubs to help them bounce back from the coronavirus pandemic. There will also be a new "small producer relief" which will include small cider makers for the first time. The number of duty rates on alcohol was reduced to six, down from 15, with the system based on the alcohol content: the stronger the drink, the higher the rate.
Duty rates on all tobacco products will increase by RPI inflation plus 2 per cent and hand-rolling tobacco by RPI plus 6 per cent. RPI is currently sitting at 4.9 per cent, which means cigarettes go up by 6.9 per cent and rolling tobacco by 10.9 per cent.
Fuel tax is to be frozen at 57.95p per litre for the 12th year in a row (a planned 2.8p rise was axed).
Air passenger duty is to be cut in half for return legs of domestic flights, however an increased air passenger duty on ultra-long haul flights pf over 5,500 miles is to be introduced. Financial support for English airports will be extended for a further six months.
Despite the surging cost of energy, the chancellor made no changes to the rate of VAT on energy bills, which still stands at 5%, nor any increases in payments for pensioners such as the winter fuel payment, cold weather payment, or the warm homes discount.
Health spending is to increase by £44bn, to over £177bn, a move the Institute for Fiscal Studies says will equate to 44% of all government spending going on the NHS over the next three years.
Schools will get an extra £4.7bn by 2024-25, including nearly £2bn of new funding to help schools and colleges to recover from the pandemic, an equivalent per pupil cash increase of more than £1,500.
The Budget included a £500m plan to support parents and children in England, including via ‘family hubs.’ £200m will also support families with complex issues.
Several new announcements relate to access to training and education. These include:
- £3bn skills training investment for 16-19-year-olds with T-levels and traineeships
- £2.6bn boost for children with special educational needs and disabilities
- £560m for maths coaching with ‘multiply’ programme
- £700m to improve sports and youth clubs
An extra £2.2bn for courts, prisons and probation services will include funding to clear the courts backlog.
A new £1.4bn British investment fund is being set up to promote inward investment. There will also be a £1.6bn increase in financing for the British Business Bank, and £20bn for R&D.
Ahead of COP26, the chancellor pledged £380m for the UK’s offshore wind sector and £6.1bn to deliver the Transport Decarbonisation Plan by boosting the number of zero emission vehicles, helping to develop greener planes and ships, and encouraging more trips by bus, bicycle and foot. £3.9bn will decarbonise buildings, including £1.8bn to support tens of thousands of low-income households to make the transition to net zero while reducing their energy bills.
A £4.8bn “Levelling Up Fund” has already identified 105 places to receive funding for local transport, cultural assets and regeneration and a £2.6bn ‘UK Shared Prosperity Fund’ will support people to access new opportunities across the UK. Tens of billions will be spent on roads and railways, and £5.7bn has been earmarked for London-style transport systems across city regions, plus spending on cycling infrastructure, community football pitches, youth clubs, regional theatres and museums.
Museums and cultural attractions will receive £800m and tax relief on museums and galleries will be extended for another two years.
New funding to improve lorry park facilities to ease supply chain disruptions, and the HGV levy will be suspended for a further year until 2023. Vehicle excise duty for HGVs will be frozen.
£24bn is to be invested into housing, including £11.5bn to build 180,000 affordable homes, 65% of which will be outside London.
£640m a year will be allocated to address rough sleeping and homelessness.
Councils continue to be able to raise taxes by 2% without a local referendum, plus another 1% for social care. Police and crime commissioners will also have the power to increase the money they raise through council tax.
The Barnett formula: Scotland will benefit from a £4.6bn per year funding boost, Wales a £2.5bn per year funding boost, and Northern Ireland a £1.6bn per year funding boost
The government will reinstate the 0.7% of GNI (Gross National Income) foreign aid funding.
Labour’s Shadow Chancellor Rachel Reeves said the budget proved the “Conservatives are now the party of high taxation”. “Never in the history of parliament has a chancellor asked the British people to pay so much for so little," she said, adding: “He’s taken £6bn away and given back £2bn to compensate.” She was standing in for Labour Leader Keir Starmer who was not in the Commons for the budget as he tested positive for covid yesterday morning – again - and had to self-isolate for the fifth time.
OTHER BUSINESS NEWS
The impact of Brexit on the UK economy will be worse in the long run compared to the coronavirus pandemic, the chairman of the Office for Budget Responsibility has said. Richard Hughes said leaving the EU would reduce the UK's potential GDP by about 4% in the long term. He said forecasts showed the pandemic would reduce GDP "by a further 2%". "In the long term it is the case that Brexit has a bigger impact than the pandemic", he told the BBC.
London listed environmental, engineering and strategic consulting company Ricardo has signed a £2.3m contract to provide technical oversight for a new driverless metro route in Taipei, Taiwan.
Saudi Arabian manufacturing and chemicals giant Sabic is to invest almost £1bn at its Teesside plant.
The company, one of the world's largest petrochemical manufacturers, told Reuters the cash injection was part of its plans to reduce its carbon footprint by up to 60% initially. Prime Minister Boris Johnson said the investment was a "huge vote of confidence" in the UK's chemicals industry and would create and safeguard 1,000 jobs.
HellermannTyton, a true British manufacturing success story with sites in 37 countries and over 3,800 global employees, is investing millions of pounds doubling the size of its factory in Plymouth.The cable specialist’s huge expansion is set to create 100 jobs.
British luxury car maker Bentley has announced the biggest-ever intake of apprentices for 2022 at their headquarters in Crewe. A total of 113 new trainees will be working across all sectors of the business.
Sky News has learnt that Ken Hanna, a former finance chief at Cadbury, has been identified as the successor to London-listed Restaurant Group’s Debbie Hewitt, who will step down at the end of the year to chair the Football Association (FA). Hanna has presided over a string of recent takeover deals, having overseen the sale of Aggreko to TDR Capital and Isquared Capital, and the disposal of RMD Kwikform to Altrad, the French industrial group. He also chairs Arena Events Group, which agreed a takeover by a Gulf consortium earlier this month. Restaurant Group has twice raised money from shareholders to steer it through lengthy periods of lockdown closures for its brands, which include Wagamama, Chiquito, Garfunkel's and Frankie & Benny's. Restaurant Group is run by Andy Hornby, the former Boots and Gala Coral chief who was in charge of HBOS when it was forced into the arms of Lloyds TSB during the 2008 banking crisis.
Third Point, helmed by skilled spinoff veteran Daniel Loeb, has taken a $500 million stake in Royal Dutch Shell, making it one of the Dutch-British energy giant's biggest investors. The hedge fund's first order of business, relayed in a letter obtained by The Wall Street Journal, proposed splitting Shell into two companies: one containing its profitable-but-toxic oil and gas businesses, and the other consisting of its money-losing but environmentally friendly renewables businesses.
BP and Daimler are to work together to accelerate introduction of a hydrogen network with the aim of decarbonising UK freight transport. BP is to assess the feasibility of building and operating as many as 25 hydrogen refuelling stations across the country by 2030, suppling the 'green hydrogen' for the stations generated from water using renewable power. Daimler meanwhile will supply hydrogen-powered fuel-cell trucks to its UK customers starting from 2025.
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