UK Chancellor Rishi Sunak has delivered a high-spending budget that he claims will boost spending on public services made possible by higher than expected economic growth
Among the key points:
The Chancellor said that departmental spending will increase by £150 billion over the term of the current parliament.
He admitted that inflation is likely to hit 4%, (some experts say it will go higher). The Chancellor conceded he has concerns over the cost of living but pledged government would be responsible with the public finances.
He announced extra money for schools, a business rates discount for hospitality and retail businesses and a cut to Air Passenger Duty for flights within the UK
A shake-up of alcohol duty, removing a system that’s been in place since the 17thcentury, will mean higher taxes on high alcohol wines and spirits. However, lower alcohol sparkling wine, cider and draught beer, will be cheaper.
Labour’s response was given by Rachel Reeves who stood in for Keir Starmer, who is suffering with Covid – She attacked the measures claiming struggling families would think the Chancellor was “living in a parallel universe”
Other pledges from Rishi Sunak included: New money for the NHS, a rise in the National Living Wage and public sector pay rises.
The Chancellor also pulled a rabbit out of the hat at the end of his speech by reducing the amount people in work who receive Universal credit will pay per pound earned by 8 per cent (the so-called taper rate).
Other highlights of the Budget:
£24bn is being earmarked for housing: £11.5bn for up to 180,000 affordable homes, with brownfield sites targeted for development
Business rates will be retained and reformed
Planned rise in fuel duty will be cancelled amid the highest pump prices for eight years
A 4% levy will be placed on property developers with profits over £25m rate to help create a £5bn fund to remove unsafe cladding
Funding will rise by an average of £4.6bn for the the Scottish Government, £2.5bn for the Welsh Government, and £1.6bn for the Northern Ireland Executive
There will be an extra £2.2bn for courts, prisons and probation services
Tax relief for museums and galleries will be extended for two years, to March 2024
Core science funding will rise to £5.9bn a year by 2024-25
UK reaction to Chancellor Sunak’s Budget package
John Rozenbroek, COO/CFO at Capify
“SMEs across the UK will have been listening carefully to today’s Autumn Budget to see what support would be on offer for businesses.
“The extension of the Recovery Loan Scheme is positive news for some, but the publishing of the Business Rates review and some early reforms was a bigger announcement. Revaluations every three years, investment relief to encourage businesses to adopt green technology and a new improvement relief to fund property changes were all welcome news. The abolishing of the HGV levy until 2023 and freeze on HGV duty further the positive picture, helping reduce supply chain issues for some UK SMEs.
“However, there is no doubt that 2022 will squeeze cashflow and profit margins further, with corporation tax rising to 25% and a 1.25% increase in employers’ NI contributions for SMEs to manage. OBR predictions for growth for the year have been revised up from 4% to 6%, so the hope will be that the economy continues to recover strongly, and the UK’s business community sees the benefits of that growth.”
Helen Watson, Head of Employment Law at Aaron & Partners said:
“Most employers listening to today’s budget would have already been aware of the proposed change to the national living wage, which was announced earlier this week. The move to increase this to £9.50 an hour from April 2022 could put pressure on many employers and there were warnings this week that the Chancellor would be risking further job losses by pushing ahead with this change.
“The prospect of higher employment costs following so closely behind the closure of the government’s furlough scheme and many businesses continuing to find their feet could be a bad combination, but only time will tell. The Chancellor had made it clear that there would be no further extension of the furlough scheme and he appears to be sticking to this commitment.”
Karan Sejpal, Head of entrepreneurs, business owners and UK regions at Cazenove Capital
“In a budget intended for the whole United Kingdom, Rishi Sunak sent a clear signal today that business owners are at the heart of driving the UK’s growth and our economic recovery from Covid-19. The central focus on encouraging inward investment into business start-ups UK-wide will be encouraging for our country’s entrepreneurs, in particular those outside of London. I have already seen first-hand an increasing pool of capital looking for investment opportunities in the UK’s growth companies outside of the Capital, for example in Scotland where the budding life sciences and renewable energy sectors are attracting interest. Some of the most innovative businesses sit outside of London, but more could be done to bring the capital, talent and opportunities to them, supporting their next phase of growth and contribution to the UK economy.
“For local businesses to truly feel the benefits of levelling up, the planned infrastructure investment in transport and local communities will also be crucial. Improving rail links not just from London to regional cities, but also between key cities across the country is central to helping business owners attract and retain talent.
“Our country’s small companies are the life blood of the UK economy, so initiatives to support their growth, and in many cases recovery in the wake of the pandemic will be welcomed. There was something for businesses across sectors in this budget – with business rates relief for companies in the leisure, retail and hospitality sectors much needed, and increased investment in research and development encouraging for those in innovative industries. This is supportive for the diverse business owner community present across the UK’s regions.”
Shevaun Haviland, Director General of the BCC:
“There is much to welcome in this Budget for business communities across the UK.
“The Chancellor has listened to Chambers’ long-standing calls for changes to the business rates system and this will be good news for many firms. It will provide much needed relief for businesses across the country, giving many firms renewed confidence to invest and grow.
“Additional investment in skills, infrastructure and better access to finance will be key drivers for our economic recovery and will provide longer-term benefits and opportunities for businesses across the country.
“Businesses have been battered by 18 months of the pandemic and problems around supply chain costs and disruption, labour shortages, price rises, soaring energy bills and taxes, and there may still be difficult months ahead.
“If firms face unexpected bumps in the road, the Chancellor must be prepared to take further action to enable the economy to fire on all cylinders again.”
Marvin Rust, Head of Tax at Alvarez & Marsal,
“Businesses were expecting the chancellor to help those sectors hit hardest by the pandemic. Business rate relief will be welcomed across the retail, hotel and leisure sectors. However, calls to extend the period where the lower VAT rate on the food, accommodation and leisure sectors have disappointingly gone ignored.”
“As the chancellor pointed out, economists are now forecasting GDP growth in 2024 and beyond to be around 1%, well below the average rate the economy is used to. Despite the dim growth predictions, the chancellor does not yet appear to have come up with a plan to support businesses beyond this period and ‘turbo-charge’ growth for the long term. The announcement on encouraging investment in Britain’s most innovative sectors is welcome, but so far not enough has been done to boost the UK’s broader productivity.
“The chancellor’s statements on post-Brexit tax reforms to research and development credits, alcohol duty, tonnage and air passenger duty are promising but he should have gone further introducing more of these changes now rather than waiting to April 2023.”