Autumn Budget Summary 2021

Insight Financial Associates

On Wednesday, October 27th Chancellor Rishi Sunak delivered his Autumn Budget to the House of Commons. He announced new plans for the government tax and spending plans, where he focused on what a post-Covid Britain would look like. One of his main points was that we would see an economy of higher wages, higher skills and rising productivity.

Here is a summary of the key details (click here for a full breakdown):

Taxation and wages:

  • Universal Credit taper rate will be cut by 8% no later than the 1st December, bringing it down from 63% to 55% – allowing claimants to keep more of the payment
  • Confirmation business rates to be retained and reformed
  • A 50% business rates discount for the retail, hospitality, and leisure sectors in England in 2022-23, up to a maximum of £110,000
  • Planned rise in fuel duty to be cancelled amid the highest pump prices in eight years
  • National Living Wage to increase next year by 6.6%, to £9.50 an hour

State of the economy:

  • Inflation in September was 3.1% and is likely to rise to average 4% over next year, OBR says
  • UK economy forecast to return to pre-Covid levels by 2022
  • Annual growth set to rebound by 6.5% this year, followed by 6% in 2022
  • Unemployment expected to peak at 5.2% next year, lower than 11.9% previously predicted
  • Wages have grown in real terms by 3.4% since February 2020
  • 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%
  • Foreign aid spending projected to return to 0.7% of GDP by 2024-25

Government spending:

  • Whitehall departments to receive rise in overall spending, totalling £150bn over the course of this Parliament
  • Funding will rise by an average of £4.6bn for Scottish Government, £2.5bn for Welsh Government, and £1.6bn for Northern Ireland Executive
  • Levelling Up Fund will mean £1.7bn invested in local areas across the UK
  • Government backing projects in Aberdeen, Bury, Burnley, Lewes, Clwyd South, Stoke-on-Trent, Ashton under Lyne, Doncaster, South Leicester, Sunderland and West Leeds
  • Extra £2.2bn for courts, prisons and probation services, including funding to clear the courts backlog
  • £6bn of funding to help tackle NHS backlogs
  • £7bn for transport projects in areas including Greater Manchester, the West Midlands and South Yorkshire

Children and education:

  • Schools to get an extra £4.7bn by 2024-25
  • There will be nearly £2bn of new funding to help schools and colleges to recover from the pandemic
  • Schools funding to return to 2010 levels in real terms – an equivalent per pupil cash increase of more than £1,500
  • £300m will be spent on a “Start for Life” parenting programmes, with an additional £170m by 2024-25 promised for childcare
  • A UK-wide numeracy programme will be set-up to help improve basic maths skills among adults

Air travel:

  • Flights between airports in the UK nations will be subject to a new lower rate of Air Passenger Duty from April 2023

Alcohol:

  • Planned rise in the duty on spirits, wine, cider and beer cancelled
  • Stronger red wines, fortified wines, and high-strength ciders will see a small increase in their rates
  • Rates on many lower alcohol drinks including rose wine, fruit ciders, liqueurs, lower strength beers and wines to fall
  • Lower duty on draught beer and cider from containers over 40 litres will cut the rate by 5%

Housing:

  • £24bn earmarked for housing, including £11.5bn for up to 180,000 affordable homes, with brownfield sites targeted for development
  • £640m a year to address rough sleeping and homelessness