
The economy and fiscal forecasts
- The economy’s growth expectation has been revised up from 4% to 6.5% this year and it will take until the start of 2022 for the economy to return to its pre-pandemic size.
- However, inflation is looking to rise from 3.1% with the Office for Budget Responsibility (OBR) forecasting that inflation will average 4% next year.
- OBR growth forecast: GDP will grow by 6% next year, 2.1% in 2023, 1.3% in 2024 and 1.6% in 2025.
- Borrowing in the current financial year (2021-22) will be 7.9% of GDP and will fall to 3.3% in 2023, 2.4% in 2024 and 1.7% in 2025. The State should only borrow to invest in future growth and for balancing everyday spending.
- Unemployment is forecast to peak at 5.2%, down from a forecast of about 12% last year.
Fix finances – taxes and duties
- There will be no rises in PAYE or VAT, but the increase of 1.25% in National Insurance and Dividend Tax rates was previously announced to commence from 6 April 2022.
- National Living Wage to increase from £8.91 to £9.50 while Minimum Wage will increase from £8.36 to £9.18 per hour.
- The public sector wage freeze has been lifted with “fair” pay increases to come.
- While business rates will remain, some changes will be:
- New valuations will take place every three years
- Investment relief will be given to those who adopt greener solutions
- From 2023, if a business invests in their premises, there will be a 12-month relief from additional business rates
- There is to be a 50% business rates discount for companies in retail, hospitality and leisure sectors, up to a maximum of £110,000.
- The Annual Investment Allowance (AIA) of £1 million will be extended to March 2023.
- Tax relief for business research and development spending will be limited to domestic activities.
- The chancellor confirmed plans to change the 0.75% ceiling on annual management fees protecting workplace pensions.
- There will be a cut in the taper rate in universal credit from 63p to 55p, while the work allowance will be increased by £500. These changes are to be implemented no later than 1 December.
- The planned increase in duty on spirits, wine, cider and beer will be cancelled.
- A radical change for alcohol duty planned:
- Higher strength alcoholic drinks will attract higher duties while lower strength drinks will attract a lower tax rate
- Duty on sparkling wines will be reduced to that of still wines
- Pubs and bars will benefit from a new “draught relief”, cutting duty on beer and cider sold in pubs
- The cost of a pint will be permanently cut by 3p
- There will be a small brewers’ relief, including for cider makers
- Fuel duty to be frozen.
A reminder of the announcements from the last budget |
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Build the future economy – investment and environment
- Internal domestic flights will have air passenger duty cut from April 2023, though long-haul (flights over 5,500 miles) will see it increase.
- The government will invest £21 billion on roads and £46 billion on railways to improve journey times between cities.
- There will be grant funding for local government of £4.8 billion.
- Government will invest £20 billion in research and development by 2024-25 with a target to reach £22 billion by 2026-27.
- Tax relief on museums and galleries will be extended until March 2024.
- £800 million fund to restore museums and art galleries.
- Tax relief for a range of creative organisations will be doubled until April 2023, while specific relief measures for museums and galleries, due to expire in March, will be extended by another two years.
- Overseas aid will return to 0.7% of GDP by the end of the parliament.