Ahead of today’s big speech more than a dozen announcements had already been revealed by the Treasury. So what else did Rishi Sunak have to say when he gave his first-ever joint budget and three-year spending review in the House of Commons?
Described as the “most leaked budget” by many, £26bn of spending was committed pre-speech, which led to a “furious” Commons speaker Lindsay Hoyle accusing the chancellor of “riding roughshod” over MPs.
As Guido Fawkes’ Christian Calgie tweeted yesterday, the “sheer amount of briefing” ahead of the budget “begs the question what rabbits does Rishi possibly have left in his hat”. Here we take a look at Sunak’s major new announcements and the reactions to the autumn budget and spending review.
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What was announced before the speech?
The Treasury’s “deluge” of funding announcements set out the government’s spending for transport, health and education, the BBC reported. However, the Labour Party accused Sunak of devising a “smoke and mirrors” budget due to a lack of new money. Major pre-speech leaks included the following:
- £5.9bn extra for the NHS in England with a proportionate amount also going to the health services in Scotland, Wales and Northern Ireland
- National Living Wage increasing from £8.91 per hour to £9.50
- An end to the freeze on public sector pay
- £6.9bn for train, tram, bus and cycle projects in England’s city regions
- £2.6bn to create 30,000 new school places for children with special educational needs and disabilities
- £1.8bn to build around 160,000 new homes on derelict or unused land in England
- £500m to support parents and children in England
- £850m to restore museums and art galleries
Economic outlook
Sunak forecasted that Britain was entering an “age of optimism” despite a looming cost-of-living crisis. He claimed his budget “begins the work of preparing for a new economy” after the Covid-19 pandemic.
According to forecasts from the Office for Budget Responsibility (OBR) the economy will “boom” this year and next, the London Evening Standard reported. However, it did warn that supply-chain issues remain “problematic”. The financial watchdog increased its forecast for the rise in GDP this year from 4% to 6.5% and said that in 2022 the economy will grow another 6%.
The OBR also reduced its estimate of the long-term “scarring” effect of Covid-19 on the economy from 3% to 2%, the BBC said. But the chancellor acknowledged that the cost of living is rising.
Universal Credit taper rate: Sunak’s ‘rabbit’
The “rabbit” in Sunak’s hat was revealed as a taper on Universal Credit, said Sky News’s Beth Rigby. The chancellor said the taper rate was a “hidden tax on work” and he announced that it will be cut by 8% from 63% to 55%. This means, for every extra £1 someone earns, their Universal Credit will be reduced by 55p rather than 63p. “That’s bigger than expected,” Rigby tweeted.
It’s a tax cut worth more than £2bn and Sunak says it will “benefit nearly two million families who will keep, on average, an extra £1,000 a year”. Changes like this normally take place next April, but this one will be introduced within weeks, said The Guardian. “No later than 1 December”, Sunak said.
Business tax cuts: delight for drinkers
There was a “boon” for pubs and high-street retailers after Sunak said business rates will be slashed by 50% this year, the Daily Mail reported. There will also be a one-year 50% cut for the hospitality and leisure sector. The measures will cut business rates by £7bn.
Sunak announced a new “post-Brexit system” of alcohol duties, including a lower rate of tax on draught beer and cider to boost pubs, Sky News reported. “The new ‘more rational’ system of levies will also see sparkling wines, such as prosecco, pay the same duty as still wines of equivalent strength.”
Meanwhile, the bank surcharge within corporation tax will be retained at 3% and overall corporate tax rate on banks will increase from 27% to 28% in 2023. The planned rise in fuel duty has also been cancelled after petrol prices hit a record high.
Not a good look before Cop26…
From April 2023 there will be a lower rate of air passenger duty for domestic flights. Nine million passengers will see the cut, and regional airports will benefit.
While this is good news for domestic air passengers, it’s not a great announcement just days before a major climate summit.
“Cough”, tweeted the Daily Mirror’s Kevin Maguire. “Cop26?”
The verdict
The “scarring assumption” of the pandemic hasn’t been as bad as forecasts imagined, said the BBC’s Chris Mason. Sunak feels “a bit more flush than he thought he would” and he’s decided, “as a result, to spend”.
Sunak delivered a budget that increases spending on public services, amid higher than expected economic growth, with total departmental spending rising by £150bn. According to budget documents, this means overall the budget leaves the government only £7.7bn a year worse off, the Mail reported. “Let there be no doubt our plan is working,” Sunak said.
However, on the opposite side of the Commons floor, shadow chancellor Rachel Reeves hit out at the Tory party’s “waste, cronyism and vanity projects”.
Standing in for Labour leader Keir Starmer after he tested positive for Covid, Reeves was handed a “huge moment on the political stage”, HuffPost reported. She told MPs: “The chancellor in this budget has decided to cut taxes for banks. So at least the bankers on short-haul flights sipping champagne will be cheering this budget today.”
Ed Davey, leader of the Liberal Democrats, tweeted: “The chancellor gave more money to his banker mates than he did to our children and schools in catch-up funding. They might say they are the party of public services but really they are the #sameoldtories.”
