Rishi Sunak has today delivered a Budget
Economy key facts
- Inflation: forecast to reach 4% over the next year.
- Growth: upgraded to 6.5% this year, 6% in 2022, 2.1% in 2023, 1.3% in 2024 and 1.6% in 2025.
- Covid scarring: revised down from 3% of GDP to 2%.
- Unemployment: expected to peak at 5.2% which is lower than the 12% initially forecast
- Wages: grown by almost 3.5% in real terms compared to February 2020.
- Debt: forecast to be 85.2% of GDP this year, 85.4% of GDP in 2023 and 85.7% in 2024 before falling in the final three years of the forecast from 85.1% to 83.3%.
- Borrowing: set to fall as a percentage of GDP from 7.9% this year to 3.3% next year, 2.4% in 2023, 1.7% in 2024 and 2025.
- New fiscal rules: in normal times underlying public sector net debt should be falling as a percentage of GDP and the state should only borrow to invest.
- Education recovery: the Chancellor announced a new package of £1.8 billion to target education recovery, bringing the total amount spent to £4.9 billion. This includes a £1 billion Recovery Premium for the next two academic years for schools and will support the most disadvantaged children and increase learning hours for 16–19-year-olds.
- Culture and entertainment sectors: the Government announced £52 million in new funding for museum and cultural and sporting bodies in the next year and £49 million in 2024-25 to support recovery from COVID-19, along with increases to the Theatre, Orchestra and Museums & Galleries Exhibition tax reliefs. The Government will also fund the £800 million Live Events Reinsurance scheme and the Film & TV Production Restart Scheme to support British events, while the Recovery Loan Scheme was extended until 30 June 2022, with a 70% government guarantee for lenders on loans up to £2 million.
- Airport and round Operations Support Scheme: the Chancellor announced an extension to the scheme for a further six months to provide airport and ground handlers in England with support for their fixed costs up to £4 million.
- Justice System: the Government announced £477 million over the next three years to help the criminal justice system recover from Covid-19, reducing backlogs and increasing the number of cases dealt with to reduce the waiting time.
- Annual Investment Allowance: the Chancellor announced an extension to the temporary £1 million level of the Annual Investment Allowance to 31 March 2023, which will also make tax simpler for businesses investing between £200,00 and £1 million.
- Business rates: the Chancellor confirmed a new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap.
- The Chancellor announced that business rate revaluations will move to every three years from 2023, and the multiplier will be frozen in 2022-23.
- He also confirmed a 100% improvement relief for business rates from 2023, reviewed in 2028.
- The Government will introduce targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage from 2023 to 2035.
- It will also give additional funding to the Valuation Office Agency to support the delivery of the new revaluation cycle.
- The Government will extend transitional relief for small and medium-sized businesses, and the supporting small business scheme, for one year.
- The proposals set out will collectively reduce the burden of business rates in England by over £7 billion over the next five years.
- Bank Surcharge: the Government has concluded its review. The rate of the banking surcharge will be set at 3% from April 2023 and the annual allowance within the surcharge will rise to £100m.
- The Government will also extend the temporary £1 million level of the Annual Investment Allowance to 31 March 2023.
- The Recovery Loan Scheme will also be extended until 30 June 2022.
- The Government confirmed over £1.6 billion for the British Business Bank’s Regional Funds and to expand the Regional Angels programme.
- Online sales tax: the Government committed to continuing to explore the arguments for and against a UK-wide Online Sales Tax. A consultation will be published shortly.
- Air Passenger Duty: the Chancellor announced a cut to domestic APD by 50%. The rate will apply to all flights between airports in England, Scotland, Wales and Northern Ireland (excluding private jets).
- The Chancellor also introduced a super long-haul distance band. This will align APD more closely with environmental objectives by ensuring that those who fly furthest incur the greatest level of duty.
- The Government is extending the Airport and Ground Operations Support Scheme (AGOSS) in England for a further six months.
- Fuel duty: the Chancellor confirmed a continued freeze on fuel duty, keeping it at 57.95 pence per litre UK-wide for 2022-23.
- The Government is continuing to freeze Vehicle Excise Duty (VED) for heavy goods vehicles (HGVs) in 2022-23 and suspending the HGV Road User Levy for another 12 months from August 2022.
- The Chancellor also announced the introduction of reforms to modernise the UK’s Tonnage Tax regime, to ensure that the British shipping industry remains highly competitive.
- Alcohol duty: the Chancellor announced a major overhaul of alcohol duty, reducing the number of main rates from 15 to 6 and taxing based on alcohol content.
- The Chancellor also confirmed a cut in duty rates on draught beer and cider by 5%, taking 3p off a pint. He added that the duty rates on beer, cider, wine and spirits will be frozen for another year.
- The Government will introduce new rates for low strength drinks below 3.5% ABV to encourage manufacturers to develop new products.
- The Government will also introduce a new small producer relief, building on the success of the Small Brewers Relief, for cidermakers and other producers of lower ABV drinks.
Personal tax changes
- The Chancellor declared that his goal is to reduce taxes and he will aim to do so before the end of this Parliament.
- Universal Credit: it was announced that the UC taper rate will be cut by 8%, from 63% to 55%, as well as increasing work allowances in UC by £500 a year. This will be introduced no later than December 1st.
- Pensions: The Government will consult on changing the regulatory charge cap for pensions schemes, unlocking institutional investment while protecting savers. The consultation will consider options to amend the scope so that the cap can better accommodate well-designed performance fees.
- Living Wage: this will increase by 6.6% to £9.50 per hour. Young people and apprentices will also see increases in the National Minimum Wage rates.
- Health and Social Care Levy: the Government said the levy will raise around £13 billion per year and that it would go towards the NHS as promised.
- Research and development: the Government is investing in health R&D, notably in new-born screenings but also 40 new hospitals, 70 hospital upgrades, 100 new community diagnostic centres and 50,000 more nurses.
- Covid spending: the Government confirmed £9.6 billion for Covid-19 related health spending and £8 billion for a major catch up programme that will help the NHS provide elective care that was delayed by the pandemic.
- NHS: the Government announcedNHS England’s day-to-day budget is set to grow by 3.8% on average in real terms – with the NHS resource budget will rise to over £160 billion by 2024-25.
- Nature for Climate Fund: the Government is expanding the Nature for Climate Fund to help meet its commitment to plant at least 7,500 hectares of trees every year in England by 2025 and restore 35,000 hectares of peatland.
- Green bond: the Government has issued its second green bond as the UK begins to build out a ‘green yield curve’.
- Decarbonisation of buildings: the Spending Review provides £3.9 billion to decarbonise buildings, including £1.8 billion to support low-income households on make the transition to net zero.
- Decarbonisation of transport: the Government will provide £6.1 billion to deliver the Transport Decarbonisation Plan by boosting the number of zero emission vehicles. This includes £620 million of additional investment to support the transition to electric vehicles, an additional £180 million to support the development of sustainable aviation fuel plants and £300 million for R&D programmes to help commercialise low and zero emission technologies.
- Energy: the Government is investing £1.7 billion to enable a final investment decision for a large-scale nuclear project. To decarbonise industry and power, the Government confirmed £1 billion for carbon capture and up to £140 million support hydrogen producers and heavy industry adopting CCUS through the Industrial Decarbonisation and Hydrogen Revenue Support scheme.
- Roads and railways: The Chancellor announced £16 billion for roads and £35 billion for the railways over the next three years, including £2.1 billion for more than 50 local roads upgrades, £5 billion to fill 1 million potholes a year, and funding for buses, cycling and walking worth more than £5 billion.
- City Region Sustainable Transport Settlement strategy: this will provide £5.7 billion to Greater Manchester, Liverpool, Tees Valley, South Yorkshire, West Yorkshire, the West Midlands and the West of England to boost local transport connectivity.
- Shared Rural Network: the Government will continue to provide £180 million for the Shared Rural Network to deliver 4G coverage across the UK.
- Project Gigabit: the Government will continue its £5 billion investment in Project Gigabit to improve broadband in hard-to-reach areas across the UK.
- Local infrastructure: the Government will invest £1.7 billion to upgrade local infrastructure through the first bidding round of the £4.8 billion Levelling Up Fund.
- Housing: the Chancellor presented a multi-year settlement for housing worth nearly £24 billion – including £11.5 billion to build 180,000 new affordable homes. He also announced the Government is investing an extra £1.8 billion to bring 1,500 hectares of brownfield land into use, meeting their commitment to unlock 1 million new homes.
- The Chancellor confirmed an increase in skills spending by 42% (26% in real terms) to £3.8 billion.
- Help to Grow schemes: After their introduction in SR20, £196 million will be invested in Help to Grow Schemes in 2024-25. This will enable over 100,000 SMEs over the SR21 period to access training and tools to boost their productivity and performance.
- Kickstart Scheme: funding will be used to extend the Kickstart Scheme to March 2022 as well as investing more than £60 million over the next three years in the Youth Offer which will help young jobseekers gain new skills.
- Visas: new Scale-up, High Potential Individual and Global Business Mobility visas will be introduced to attract highly skilled people and support inward investment. The visa will be open to applicants who pass the language proficiency requirement and have a high-skilled job offer from an eligible business with a salary of at least £33,000. A Global Talent Network will be introduced to find and bring talented people to the UK to work in the science and technology sectors.
- Apprenticeships funding: this will increase to £2.7 billion by 2024-25 to support businesses to build a skilled workforce. The £3,000 apprenticeship hiring incentive will also be extended until 31 January 2022.
- Multiply Programme: a £560 million programme will be introduced to improve adult numeracy skills. Funding will also be used to quadruple the number of places on Skills Bootcamps and expand the Lifetime Skills Guarantee on free Level 3 qualifications.