Autumn Budget 2021 and Spending Review

The Chancellor Rishi Sunak is delivering the Autumn Budget and Spending Review 2021 – find out all the changes here.
8 min read
Palace of Westminster

In one of the most important budgets in a long time, Rishi Sunak is currently setting out the UK’s financial course for a post-COVID economy.

The Chancellor and MP for Richmond started off by saying that this budget ‘delivers a stronger economy for the British people’ and that ‘the UK is recovering faster than most major competitors.’ He also said that the UK ‘has its debt under control’, with ‘stronger employment, with fewer people out of work and more people in work.’

Supply Chain Issues

In relation to the fuel shortage crisis and supply issues, the Chancellor had this to say:

“In the year to September, the global wholesale price of oil, coal and gas combined, has more than doubled. The pressures caused by supply chains and energy prices will take months to ease.”

“It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with finance ministers around the world and it’s clear these are shared global problems, neither unique to the UK, nor possible for us to address on our own.”

HGV Driver Support

Sunak said that the suspension of the HGV levy will be extended to 2023 and vehicle excise duties for HGVs will be frozen.

The Chancellor also announced new funding to improve lorry parking facilities and that the budget will further support working families. He also iterated the importance of keeping low and stable inflation in the Government’s fiscal policy for a stronger economy.

Growth, Spending and Borrowing

The OBR (Office for Budget Responsibility) amended their unemployment forecast due to the coronavirus pandemic from 12%, down to 5.2%, the Chancellor said. They also revised their economic growth figure to 6.5% (up from 4%), and 6% in 2022. Economic growth rates for the three years thereafter are expected to be 2.1%, 1.3% and 1.6% respectively. The OBR expects the UK economy to reach its pre-COVID level at ‘the turn of the year’.

Sunak also said that UK borrowing will fall within the foreseeable future, with borrowing as a percentage of GDP will fall from 7.9% to 3.3% next year – falling below 2% in the next five years.

He also said the UK aid spending is expected to return to a rate of 0.7% of national income by 2024/25. Total departmental spending over the Parliament will increase by £150 billion, says the Chancellor.

Local governments will also see extra funding via a grant over the next three years, equating to a total of £4.8 billion, to which the Chancellor says this is the largest increase in core funding for over a decade.

Property developers whose profits exceed £25m will have a new levy of a rate of 4% placed on them, in order to raise £5bn to remove unsafe cladding from high rise buildings and other properties across the country.

The MP for Richmond also said that courts, prisons and probation services will receive an extra £2.2 billion in funding, as well as £500,000 to resolve backlogged court cases.

Funding to Other Areas

The Chancellor then announced a series of funding projects for various sectors:

Childcare Support: £300m for ‘A Start for Life’ parenting programmes, with £170m extra going into childcare systems by 2024/25. Education: £4.7bn for schools by 2024/25. Sunak also said: “Combined with the ambitious plans we announced at Spending Review 2019, this will restore per pupil funding to 2010 levels in real terms – equivalent to a cash increase for every pupil of more than £1,500.”

“And for children with special educational needs and disabilities we’re more than tripling the amount we invest to create 30,000 new school places.”

“We’ve already announced £3.1 billion to help education recovery. Today, as promised by the Prime Minister and Education Secretary, we will go further – with just under £2 billion of new funding to help schools and colleges – bringing this Government’s total support for education recovery to almost £5 billion.”

Museums and Galleries: The Chancellor said – “On current plans, the tax relief for museums and galleries is due to end in March next year – just as exhibitions are starting to tour again, so I’ve decided to extend it, for two years, to March 2024.”

He added:

“To support theatres, orchestras, museums and galleries to recover from Covid, the tax reliefs for all those sectors will – from today until April 2023 – be doubled.

And they won’t return to the normal rate until April 2024.”

‘Levelling Up’ Fund

Sunak also announced what the government are calling the ‘Levelling Up’ Fund – which will see £1.7 billion worth of investment into ‘the infrastructure of everyday life over 100 local areas.’

He added:

“With £170m in Scotland, £120mn in Wales, and £50m in Northern Ireland – more than their Barnett shares. This will benefit the whole United Kingdom.”

The government is also backing projects in places such as Aberdeen, Burnley and Stoke-on-Trent, along with Labour areas such as Doncaster and Sunderland.

Devolved administrations will see increased funding also – with the Scottish Government gaining an extra £4.6 billion a year, with the Welsh Government getting £2.5 billion extra and the Northern Ireland Executive receiving £1.6 billion extra a year on average.

Science and Transport

The extra funding will also be given to scientific research and development in a bid for the UK to be a world leader in scientific discoveries.

Sunak says funding for science will increase by £5.9 billion per year until 2024/25, an increase of 37%. The government will maintain its target to increase research and development investment to £22 billion.

Mr Sunak also announced £2.6 billion in funding for road upgrades and £5 billion for road maintenance. He also said that funding for buses, cycling and walking totals more than £5 billion.

Funding for greener transport will help support green transport projects such as the nationwide rollout of zero-emissions vehicles, as well as greener aviation options and sea-faring transport.

A numeracy skills programme for adults, called Multiply, was also announced. It helps with basic maths skills for millions of adults and has received £560 million in funding.

Business Rates and Duties Reforms

The Budget also featured reforms to air passenger duty for domestic flights, starting April 2023. The Chancellor said:

“Right now, people pay more for return flights within and between the four nations of the United Kingdom than they do when flying home from abroad.

We used to have a return-leg exemption for domestic flights but were required to remove it in 2001. But today I can announce that flights between airports in England, Scotland, Wales and Northern Ireland will from April 2023 be subject to a new lower rate of Air Passenger Duty.

We’re also making changes to reduce carbon emissions from aviation. Most emissions come from international rather than domestic aviation. So I’m introducing, from April 2023, a new ultra long haul band in air passenger duty – covering flights of over 5,500 miles, with an economy rate of £91.

Less than 5% of passengers will pay more, but those who fly furthest will pay the most.”

The Chancellor also announced a 50% cut in business rates in the retail, hospitality and leisure sectors, being able to get a discount on bills up to a maximum of £110,000.

Sunak also said business rates will have more frequent revaluations every three years. He also said:

“We’re introducing a new investment relief to encourage businesses to adopt green technologies like solar panels. And I’m announcing today that we’ll accept the CBI and the British Retail Consortium’s recommendation to introduce a new ‘business rates improvement relief.

From 2023, every single business will be able to make property improvements – and, for 12 months, pay no extra business rates.”

Radical reform to Alcohol Duty

Sunak also said the Alcohol Duty system will be given an overhaul, and it will work by a ‘the stronger the drink, the higher the rate’ approach. The Campaign for Real Ale welcomed this reform.

The Chancellor said that the 28% ‘irrational’ premium duty on sparkling wines will come to an end while duty on fruit-based ciders will be cut. He said that many lower alcohol drinks are currently overtaxed, but these changes will mean businesses will now pay less tax on these types of beverages. Sunak said the planned increase in alcohol duty is now scrapped. He also announced a ‘draught relief’ – a new and lower rate of duty on draught beer and cider, cutting tax by around 5%. The new reforms will come into effect in February 2023.

U-turn on Fuel Duty Rise; Minimum Wage Changes The planned rise on fuel duty will now be scrapped since fuel pump prices are at their highest in 8 years, the Chancellor announced.

He also said public sector workers will see ‘fair and affordable’ pay rises over the Spending Review period as the public sector pay cap has now expired. He also confirmed the minimum wage will increase to £9.50 an hour next year.

The Universal Credit taper rate will reduce from 63% to 55% (down 8%) from December 1, to make sure ‘works pay’.

The Shadow Chancellor has criticised the Budget proposals, citing the announcements as ‘economic mismanagement, an unfair tax system, and wasteful spending.’ She also said Sunak was ‘living in a parallel universe’ and that ‘never have the British people paid so much for so little.’

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