Sunak promises his Budget will deliver a “stronger economy for the British people” and leave them in “no doubt” that the Government’s plan is working.
The Chancellor says his budget will deliver “an economy fit for a new age of optimism – where the only limit to our potential is the effort we are prepared to put in and the sacrifices we are prepared to make”, stating that this budget is the foundation for a stronger economy of the future.
Economic and fiscal context:
- Sunak reveals he has written to the Governor of the Bank of England “to reaffirm their remit to achieve low and stable inflation”, predicting a 4% inflation over the next year.
- The Office for Budget Responsibility (OBR) now expects Gross Domestic Product (GDP) to expand by 6.5% this year, compared to the 4% it forecast at the Budget in March 2021. This is below what the Bank of England expects – it is predicting 7.4% growth. GDP is expected to be back to pre-COVID levels by the end of the year.
- The OBR has downgraded unemployment to 5.2%, compared to 12% expected in February 2021, meaning “over two million fewer people out of work than previously feared”.
- The OBR also reduced its estimates for the economy’s longer-term scarring from 3% to 2%.
- Underlying debt is forecast to be 85.2% of GDP this year, then 85.4% in 2022-23, before peaking at 85.7% in 2023-24. It is then due to fall in the final three years of the forecast from 85.1% to 83.3%.
- Sunak outlined four fiscal judgements in this Budget; he explained the fiscal situation in the UK is more “sensitive” than it was before the pandemic, so forecasts have been adjusted. Secondly, he says he wants to continue to help working families. Thirdly, he says he wants to meet obligations to the world’s poorest people. And finally, he says spending is growing by 3.8% a year in real terms. Every department will see a real term rise in overall spending because of this.
Backing businesses and jobs:
- The Chancellor announced another year of business rates relief for firms in the retail, hospitality, and leisure sectors. Businesses will be able to claim a 50% discount on their bills at up to £100,000, a tax break worth £1.7 billion.
- Tax relief for theatres, museums, and galleries will be doubled until 2023, forming part of a tax relief for culture worth almost a quarter of a billion pounds.
- The British Business Bank’s regional financing programmes will be increased to £1.6 billion.
- An extension of the temporary £1 million level of the Annual Investment Allowance to March 2023 will provide more support to help businesses across the UK to invest and grow.
- New investment incentives in England totalling almost £750 million will include tax relief for eligible green investments and a new ‘business rates improvement relief’.
- Sunak confirmed that £1.4 billion will be set aside for a Global Britain Investment Fund to help lure in foreign investment.
- A new Scale-Up Visa will make it easier for firms to hire talented people from around the world.
- A new Global Talent Network will identify, attract, and relocate the best global talent in key science and tech sectors, launching initially in the Bay Area of San Francisco and Boston in the USA in 2022, alongside Bangalore in India.
- The Treasury is increasing spending on boosting skills by £3.8 billion over this Parliament, a 42% rise. It will include a £560 million Multiply programme to improve adults’ basic maths skills.
- Increased apprenticeship funding in England to £2.7 billion in 2024-25.
- Funding for the Restart scheme in England and Wales has been confirmed, to continue providing intensive and tailored support to long-term unemployed people to help them find work.
- £90 million to extend the Job Entry Targeted Support Scheme to the end of September 2022.
- The allocation of the first round of the UK-wide Levelling Up Fund sees £1.7 billion of local investment in local areas.
- The launch of the over £2.6 billion UK Shared Prosperity Fund focussed on funding programmes to help people into jobs and get on in life.
- £5.7 billion for London-style transport settlements in English city regions over five years, including Greater Manchester, Liverpool City Region and the West Midlands, amongst others.
- £2.6 billion between 2020-2025 for a long-term pipeline of over 50 local roads upgrades, over £5 billion for local roads maintenance; and funding for buses, cycling and walking totalling more than £5 billion in England.
- The first 21 ‘levelling up’ projects will receive funding from the £150 million Community Ownership Fund, helping communities across the UK protect and take ownership of their most treasured local community assets.
- This Spending Review provides an additional £8.7 billion per year to the devolved administrations, the Scottish Government will benefit from a £4.6 billion per year funding boost, the Welsh Government will receive a £2.5 billion boost and the Northern Ireland Executive a £1.6 billion boost.
Innovation, environment, and infrastructure:
- Aim to maintain the target to increase research and development investment (R&D) investment to £22 billion, and increase “core science funding” to £5.9 billion a year by 2024-25.
- Supporting private R&D investment by increasing funding for core Innovate UK programmes, reaching £1 billion per year by 2024-25. This is £300 million more per annum than in 2021-22.
- £380 million for our world-leading offshore wind sector and £6.1 billion 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.
- £3.9 billion to support the decarbonisation of buildings.
- A new £1.4 billion Global Britain Investment Fund will provide grants to encourage internationally mobile companies to invest in the UK’s critical and most innovative industries, including life sciences and automotive.
- 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.
- Pay rises for around five million public sector workers, following the freeze in pay during the pandemic.
- A cut to the Universal Credit Taper. The taper, which cuts support as people work more hours, will be reduced from 63% to 55% – a boost for low income households worth £2 billion.
- Building on the success of the Plan for Jobs, the Budget and Spending Review will continue supporting people into work with over £6 billion of funding for the Department for Work and Pensions (DWP) over the next three years to help people earn more and gain the right skills.
- The new Health and Social Care Levy, along with an increase to the rates of dividend tax, will raise around £13 billion per year for spending on health and social care across the UK.
- Investment of £11.5 billion in the Affordable Homes Programme in England from 2021-26 to help build up to 180,000 new affordable homes.
- Fuel Duty will be frozen for the 12th consecutive year.
- The alcohol duty system will be overhauled to make it fairer and more straightforward, with drinks taxed in proportion to their alcohol content and duty rules simplified.
- The Tonnage tax will be revised, rewarding shipping companies that adopt the UK’s merchant shipping flag, the Red Ensign.