Budget Latest: Spending on Many Departments Still Below 2010

Chancellor Rishi Sunak has just unveiled his Autumn Budget spending review, although many major Budget announcements have already been made, but there was some new information.

We have all the latest news, from universal credit taper cuts to trimming air passenger duty on short haul flights. There were cuts in alcohol duties too. Nevertheless, the tax burden is now at its highest levels since the early 1950s.

Sunak hailed what he described as the success of government policy, exclaiming “growth up, jobs up, debt down”. He said government policies “begins the work of preparing for a new economy… Only limit is the effort we are prepared to put in.”

But he admitted the government faced a “challenging backdrop of rising inflation. Likely to rise further – Office for Budget Responsibility (OBR) says inflation will be 4% over next year.”

On the truck driver shortage front, Sunak added: “We’ve already suspended the HGV levy until August. extending until 2023 and freezing vehicle excise duty for heavy goods.”

Sunak pointed out that unemployment will peak at 5.2% and claimed that real wages were rising.

The government previously announced that the national minimum wage would be increasing to £9.50 an hour for those aged 23 and above and to £9.13 for those aged 22-23 years.

Departmental day to day budgets 2021-22 – many show lower budgets than in 2010
	£ billions	%
Health and social care	176.6	27
Home Office	13.1	17
Education	71.4	-3
Defence	31.4	-6
Foreign Office	7.2	-16
Justice	8.7	-21
Transport	9.3	-32
Source: Institute of Fiscal Studies, HM Treasury

Economic scarring less than expected at 2%

On economic scarring from the damage wrought by the pandemic was not as bad as previously thought. “OBR has revised down scarring from 3% to 2%”. This means GDP will only be 2% less than it would otherwise have been.

“Our plan for jobs is working,” said Sunak.

Emphasised importance of strong public finances – borrowing at highest level since the second world war.

Need to strengthen our public finances – publishing new charter for budget responsibility, with two new rules:

1. underlying PB net debt must be falling
2. in “normal year”only borrow to invest in future growth

Rules must be met by third year of every forecast period.

“Because of our tough and responsible decision, OBR reports all the government’s borrowing rules have been met,” says Sunak.

He says that by the end of the year the economy will be back where it was before the Covid pandemic, although that doesn’t tally with comments on scarring.

Here are some other highlights, much of which had been previously announced:

• £5.7 billion to improve public transport in the northern cities and conurbations.
• Overseas aid to return to 0.7% of GDP by 2024/25
• £150 billion increase in spending – “so real term rise in overall spending for every single department”
• £4.8 billion increase in core funding for local government
• £11.5 billion for new affordable home
• £1.8 billion to bring brown field land into use
• £5 billion to remove unsafe cladding, partly funded through levy on developers
• £640m for rough sleeping and homelessness
• £500m to reduce the courts backlog
• Cash increase for every pupil of £1,500.
• £560m for youth clubs
• £1.7 billion from the levelling up fund to invest in 100 local areas
• 100 regional museums to be renovated

Creative tax relief on museums and galleries – extending for 2 years, until April 2023 and will be double – “tax relief for culture worth £250 million”

Sunak: “Invest more in innovation”

• increase R&D to £22 billion by 2026/27
• 0.7% in 2018 to 1.1% by end of the parliament. OECD average is 0.7%
• increase annual core science £4.9 billion
• £30 billion for renewable energy investment net zero strategy. 3rd largest issuer of green bonds

confirmed consulting on lifting cap on pension fund fees

New scale-up visa to make it easier to being in highly skilled individuals – “the most competitive in the world”

Air passenger duty cut for domestic flights

9 million passengers on flights between domestic destinations will see air passenger duties halved in a boost to regional airports and extending support for six months.

Corporation tax

Reiterates corporation tax 25% from 2022

Super deduction will stay in place

Now not the time to remove tax breaks. Annual 1m investment allowance will be extended to match 2023.

Bank surcharge will be retained of 3%. corporation tax on banks will rise from 27% to 28% but allowance for small banks raise to £100 million.

Retain business rates but with reforms

More frequent revaluation every 3 years from 2023

introducing investment relief to encourage green tech

Accept CBI recommendation on business rates improvement relief – for 12 months pay no rate on hew investment

Next year’s planned increase in multiplier cancelled (saving of 4.6 billion for businesses)

50% discount on business rate for hospitality sector, up to £110,000

Overall cut of £7 billion in business rates.

Alcohol duties – draft beer duty cut by 5%

Alcohol duty “outdated and complex”.

Number of main duty rates reduced from 15 to six.

stronger the drink the higher the rate – end era of cheap high strength drinks.

Many lower alcohol drinks overtaxed, such as fruit ciders and liqueurs. They will now pay less.

Encourage craft producers – new small producer relief. Will include small cider makers and those making drinks of less than 8.5% alc.

Sparkling wines to have same duty as still wines of equivalent strength – English and Welsh wines will pay less.

Consumption in ontrade (pubs) fell 40% even before pandemic. Draft relief – new lower duty on draft beer and cider. cut duty by 5%. Biggest cut to beet duty for 50 years.

Planned increase in duty on spirits, wine and beer will be cancelled (worth £12 billion).

Fuel duty

Planned rise in fuel duty cancelled.

Public sector pay and minimum wage

6.6% increase in national living wage confirmed.

Promises “fair pay” for public sector by respecting pay review body recommendations. No more details.

Personal taxation

“I want taxes to be going down not up… That is mine mission.”

Universal credit taper withdraws support for working harder.

For every £1 the benefit is reduced by 63p. “This is a tax on work”

Taper cut by 8% – from 63% to 55%. Sunak says this is worth £2 billion – “tax cut for the lowest paid workers in our country”.

Will be introduced no later than 1 December this year.