Budget 2021: Rishi Sunak promises ‘we will help families get by’

Rishi Sunak threw open the spending taps on Wednesday, pledging a £150 billion boost for Government departments as the UK’s economy showed a better-than-expected recovery from the Covid pandemic.

Delivering his third Budget since becoming Chancellor, Mr Sunak announced £2 billion of help for families with the cost of living through changes to Universal Credit and pledged to deliver lower taxes for working people by the end of the Parliament in 2024.

Forecasts from the Government’s fiscal watchdog, the OBR, predicted a brighter outlook for the economy with GDP expected to grow by 6.5 per cent in 2021/22 – up from its 4 per cent prediction in March. The OBR also estimated that long term damage to the economy would be one percentage point lower at 2 per cent.

Despite a gloomier picture on inflation – now predicted to rise to an average of 4 per cent over the next year adding further strain on household budgets already feeling the pinch from rising energy bills and planned tax rises in the Spring – the stronger recovery means public sector net borrowing is now forecast to be £50 billion lower by 2021/22.

With the public finances in a far healthier state than feared, Mr Sunak unleashed a series of major spending commitments on health, housing, education and levelling up.

Total departmental spending would increase by £150 billion-a-year by the end of this Parliament in 2024/25 which the Chancellor trumpeted as the “largest increase this century”, promising it would mean “a real terms rise in overall spending for every single department”.

Paul Johnson, director of the Institute for Fiscal Studies, tweeted: “£150bn increase in departmental spending, over Parliament. 3.8 per cent a year real increase. Those are BIG spending increases.”

He also announced eye catching plans to reduce and simplify duties on alcohol, introducing tax reliefs for craft beer brewers and reducing duties on British sparkling wine.

The 8 per cent cut to the Universal Credit taper, from 63 per cent to 55 per cent, will mean lower paid workers can keep more of their benefit payments from December 1.

Although Labour insisted that the move would only partially offset the scrapping of the £20 a week Universal Credit uplift earlier this month, Mr Sunak insisted it was part of a wider plan to address cost of living concerns and reward working families.

“This is a £2 billion tax cut for the lowest paid workers in the country,” Mr Sunak said. “It supports working families. It helps with the cost of living. And it rewards work.”

Shadow Chancellor Rachel Reeves, standing in for Labour leader Sir Keir Starmer who was isolating after testing positive for Covid this morning, accused the Chancellor of arrogance, and criticised plans to raise National Insurance from next April.

She added: “Whilst we welcome the action taken today on Universal Credit, millions will struggle to pay the bills this winter.

“The Government has done nothing to help people with their gas and electricity bills with that cut in VAT receipts as Labour has called for. Working people are left out in the cold while the Government hammers them with tax rises.”

But Mr Sunak insisted the Budget and three year spending review for Government departments set out a vision for post-Pandemic Britain and would give families “the tools to build a better life for themselves”.

The Chancellor also announced:

* A new draught relief, on drinks served from draught containers over 40 litres, will cut duty by five per cent, which the Chancellor described as “the biggest cut to beer duty for 50 years” which he said would mean a “permanent cut in the cost of a pint by 3p”.

* A major shake-up of alcohol tax would slash the number of main duty rates from fifteen to just six. Stronger red wines, fortified wines, and high-strength ‘white ciders’ will be more heavily taxed, but it will be lowered on rosé, fruit ciders, liqueurs, lower strength beers and wines. Mr Sunak ended the duty premium of 28 per cent on sparkling wines, saying they will now pay the same duty as still wines of equivalent strength.

* The cancellation of a planned rise in fuel duty.

* A £1.7 billion cut to business rates would see for one year a new 50 per cent business rates discount, up to a maximum of £110,000, for businesses in the retail, hospitality, and leisure sectors including pubs, music venues, cinemas, restaurants, hotels, theatres and gyms.

* How spending on foreign aid would return to 0.7 per cent of national income in 2024-25, sparking criticism from some MPs in the Chamber that it would take so long to do so.

* The bank surcharge will be cut from eight per cent to three per cent.

* A plan to commit nearly £24 billion to housing in what Mr Sunak said was a multi-year settlement, with £11.5 billion to build up to 180,000 new affordable homes and a further £1.8 billion to bring 1,500 hectares of Brownfield land into use.

* Schools would get an extra £4.7bn by 2024-25, which Mr Sunak stressed would “restore per pupil funding to 2010 levels in real terms… …equivalent to a cash increase for every pupil of more than £1,500”.

* An “infrastructure revolution” would include £5.7 billion for London-style transport settlements in Greater Manchester, the Liverpool region, Tees Valley, South Yorkshire, West Yorkshire, West Midlands, and the West of England, though it was not clear how much of this money was new.

*A further £2.6 billion would go towards a “long-term pipeline” of over 50 local roads upgrades, with more than £5 billion for local roads maintenance which could fill one million more potholes a year, the Chancellor stressed Funding for buses, cycling and walking schemes would total more than £5 billion.

* That flights between airports in England, Scotland, Wales and Northern Ireland will from April 2023 be subject to a new lower rate of Air Passenger Duty, but a new “ultra long haul” band in the duty would be introduced covering flights of over 5,500 miles, with an economy rate of £91.

* The Government’s target of spending £22bn on research and development was pushed back by two years to 2026/27, but Mr Sunak committed to spend £20bn a year on R&D by the end of this Parliament. He added that when combined with tax reliefs, the UK’s total public investment in R&D would rise to 1.1 per cent of GDP by 2024.

* £5.9 billion of NHS capital spending including to address waiting lists, currently at 5.7 million people and set to rise further, possibly to seven million. Out of this sum, £2.3 billion will be used to boost diagnostic services, such as CT, ultrasound and MRI scans. Meanwhile, £2.1 billion will be allocated for technology and data to improve digital systems within hospitals and mental health care centres.

The Chancellor said day-to-day spending on health care will have risen at the start of the Parliament from £133 billion to £177 billion by the end.

* In the wake of the murder of Sarah Everard which shocked Britain, the Crown Prosecution Service is set to get £80 million in extra funding, part of which will go towards improving the response to rape and sexual assault cases Funding towards helping victims, including those of domestic and sexual abuse, will increase to £185 million.

Around £74 million is being allocated for a new fleet of 11 “cutter” patrol boats, to replace ageing vessels, to shore up Britain’s borders and try to stem the flow of migrants crossing the Channel from France.

*That, as part of the Government’s wider drive to create a “high wage, high skills, high productivity” economy, the Chancellor pledged a further £3 billion to boost training and skills.

This includes £1.6 billion to boost college funding for 16-19 year-olds and £830 million to improve existing colleges in England.

* A further £550 million will be invested in the National Skills Fund to help adults of any age to retrain and change careers.

* The end of the one-year freeze on public sector pay, though ministers would not guarantee that wage rises would outstrip inflation.

* The National Living Wage, for workers aged 23 and over, will rise by 6.6 per cent, from £8.91 an hour to £9.50 in April.

After fire-fighting the economic blows from the pandemic with a package costing more than £400 billion including furlough and loan schemes, Mr Sunak used the Budget to lay out how he now wants to reshape Britain into a “high wages, high skills and high productivity” economy.

“This Budget is about what this Government is about,” he said.

“Investment in a more innovative, high-skill economy….because that is the only sustainable path to individual prosperity.”

He sought to balance spending with strict fiscal discipline to show his determination to bring Britain’s public finances back under control, with the nation’s debt mountain having soared to more than £2 trillion.

After a recent bust-up with bosses over labour market shortages and Brexit, Mr Sunak sought to build bridges vowing to “back business”.

He stressed: “Our future cannot be built by government alone but must come from the imagination and drive of our entrepreneurs.”

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