Last reviewed 27 October 2021
What follows may not come as a total surprise, given that the Government has leaked most of its good news about transport, health and education in advance. This is why Chancellor Rishi Sunak was sharply reminded by the Deputy Speaker, Dame Eleanor Laing, that MPs expect to hear the news from him, not the media.
These are the main points of his hour-long speech which included some surprises as well as several confirmations of the announcements that had been flagged up in advance.
“Levelling up” would be the “golden thread” running through his Budget, Mr Sunak said. Armed with forecasts from the Office of Budget Responsibility (OBR), he expects annual growth to bounce back by 6.5% this year and the economy to return to pre-Covid levels by 2022. Unemployment is expected to peak at 5.2% next year.
In this context, the Chancellor said that every Government department would see a real terms rise in public spending.
Outdated and too complex, Mr Sunak said, so the UK will carry out the "most radical simplification of alcohol duty” for over 100 years. There will be just six duty rates on alcohol and the stronger the drink, the higher the rate. This means that some stronger spirits and wines will become more expensive, but weaker products such as beer and rosé will become cheaper.
A new draught relief will cut duty by 5% to “help preserve British pubs” by providing a permanent cut in the cost of a pint by 3p.
Passengers flying between airports in the UK can expect to pay a new lower rate of Air Passenger Duty (APD) from April 2023 while a new “ultra-long haul” band will be introduced for flights of over 5500 miles.
The Government intends to make the business rates system fairer and timelier with more frequent revaluations (every three years, starting in 2023). From that date, every business will be able to make property improvements (such as offices adding new ventilation systems) and, for 12 months, pay no extra rates as a result.
Until 2035, plant and machinery used onsite for renewable energy will be exempt from business rates altogether.
Finally, there will be a 50% cut in business rates which can be claimed for one year by businesses in the entertainment and hospitality sectors — pubs, music venues, cinemas, restaurants, hotels, theatres, gym — up to a maximum of £100,000.
The Chancellor has committed to spend £300 million on a Start for Life offer for families, providing parenting programmes and help with perinatal mental health. He also confirmed funding to create a network of Family Hubs around the country with an extra £170 million being made available.
Mr Sunak then announced £150 million to support and train those who work in early years, along with more funding for holiday activity and food programmes.
With an extra £4.7 billion to be available by 2024–25, Mr Sunak said that per pupil funding would be returned to 2010 levels, an equivalent per pupil cash increase of more than £1500. There will also be 30,000 new places for those with special needs.
“We know that the pandemic caused significant disruption to children’s learning and we've already announced £3.1 billion to help education recovery,” he went on. “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.”
However, as was immediately noted by several commentators, this falls well short of the £10 to £15 billion called for by the Government’s former advisor, Sir Kevan Collins.
The much-criticised cut will be restored (back to 0.7%) in 2024.
As was widely predicted in the Sunday newspapers, NHS England will get £5.9 billion to tackle the backlog of people waiting for tests and scans. That includes: £2.3 billion for diagnostic tests (including clinics in shopping centres for scans); £1.5 billion to be spent on beds and other equipment and new “surgical hubs”; and £2.1 billion to improve IT.
Brownfield land will be targeted for new homes, the Chancellor confirmed, with £11.5 billion available for up to 180,000 affordable homes. In addition, £5 billion will be provided to remove unsafe cladding from the highest risk buildings.
This will be partly funded by the Residential Property Developers Tax which will be levied on developers with profits over £25 million at a rate of 4%.
The Government will increase spending to 1.1% — more than France, Germany and the United States currently offer — and, by the end of this parliament, spending on R&D will be £20 billion a year (up by 50%). The scope will be expanded to cover cloud computing and data.
However, R&D tax relief rules will change as the current system subsidises R&D happening outside the UK. “That is not fair” the Chancellor said, “and inconsistent with what is happening in other countries.” From April 2023. therefore, the relief will have to subsidise investment at home.
As the UK now has the freedom, outside the EU, to deliver “a simpler, fairer tax system”, the Chancellor said that he would start with a small tax but an important one — the tonnage tax for shipping. In the EU ships have to fly the flag of an EU state. Now the tonnage tax will reward companies for adopting the UK merchant shipping flag, the red ensign.
Skills spending over this parliament is increasing by £3.8 billion, the Chancellor pointed out as he highlighted that millions of adults have numeracy skills lower than those expected of a nine-year-old. He is therefore introducing a new “Multiply” programme which will help up to 500,000 adults improve their numeracy, transforming their employment prospects.
Corporation tax is rising, as previously announced, but the £1 million annual investment allowance is now to be extended to March 2023, instead of ending in December.
To offset the expected impact of rising inflation, next year’s planned increase in the multiplier will be cancelled, giving a tax cut for business worth £4.6 billion over the next five years.
Money will be made available to improve facilities for heavy goods vehicle (HGV) drivers, Mr Sunak said. And the planned rise in fuel duty will be cancelled.
"We’ve already suspended the HGV levy until August,” he went on, “and I can do more today extending it for a further year until 2023, and freezing Vehicle Excise Duty (VED) for HGVs.”
The Government had already announced that England's city regions will receive £6.9 billion to spend on train, tram, bus and cycle projects — including £1.07 billion for Greater Manchester, £1.05 billion for the West Midlands and £830 million for West Yorkshire.
Describing it as a tax on employment, as it reduces the amount of Universal Credit that people receive as they take on more work, Mr Sunak confirmed that he will cut the universal credit taper rate from 63% to 55%.
He promised that this would be introduced by no later than 1 December and cited the example of a single mother of two renting, and working full time on the National Living Wage, who will be better off as a result, by around £1200.
Again as widely trailed beforehand, the National Living Wage is set to increase from £8.91 per hour to £9.50, with effect from 1 April next year. This is a 6.6% increase in the minimum wage for all those aged 23 and over.
Assuming a 40-hour week, the new minimum wage amounts, the Chancellor said, to a salary of £1646 per month or £19,760 a year.
On public sector pay, Mr Sunak said those workers will see “fair, and affordable pay rises” across the next few years, which will return to being made independently (not subject to a Government freeze).