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Budget 2021: What we know so far about Rishi Sunak's spending plan

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·6-min read
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Budget 2021: What we know so far about Rishi Sunak's spending plan
Chancellor Rishi Sunak is set to deliver the Budget and Spending review on Wednesday Photo: Matt Dunham/AP

One of the more hotly anticipated UK spending reviews in recent memory is due on Wednesday, as the country looks at how the post-pandemic recovery and post-Brexit relations will be managed. 

Ahead of the announcement, a raft of economic policies have already been drip fed out through the Treasury, with plans ranging from tax reform to billions in spending. 

Among measures already announced in September is a 1.25 percentage point increase in national insurance payments, due to hit in 2022. This is slated to raise £12bn ($16.5bn) per year for health and social care spending. 

Employee national insurance rates have been unchanged at 12% since 2011. The move would mean that someone earning £30,000 a year would pay about £250 extra in tax.

Watch: Is a UK state pension enough to survive on in retirement?

It is the biggest UK tax increase for 28 years.

The pensions triple lock was also scrapped for another year in September, meaning that that pensions will not rise by 8% next April, but will instead rise by the rate of inflation, which currently stands at 2.5%.

The triple lock ensures the state pension will increase in line with either the rate of inflation, wages, or 2.5% — whichever is highest.

In other pensions changes, retirees are on course for a £5.55-a-week increase in the full new state pension next year.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) measure of inflation edged down to 3.1% in September, from 3.2% in August.

The Work and Pensions Secretary will be carrying out an annual uprating review of benefit and pension rates shortly, the outcome of which will be confirmed later this year. 

Read more: UK small businesses are worried about growth, not debt

On the slate this week...

Funding for the NHS topped up

Over the weekend, the government said it will provide £6bn to the NHS to tackle backlogs caused by the coronavirus pandemic, a commitment expected to be announced officially on Wednesday.

This is to take on the millions left waiting for diagnostic tests and non-emergency operations.

The investment in NHS capital funding will support the aim to deliver around 30% more elective activity by 2024-25 compared with pre-pandemic levels.

The treasury also announced a £5m UK-wide Veterans’ Health Innovation Fund, which will ensure veterans who have suffered injuries or mental health challenges can access the most cutting-edge treatments.

Watch: What is a budget deficit and why does it matter?

'Levelling up' local transport with £7bn

The Treasury also said the chancellor will lay out a £6.9bn boost for local transport. Of that total £5.7bn will go to sustainable transport settlements for city regions to boost productivity through train and station upgrades and the expansion of tram networks in cities outside of London.

£1.2bn of new funding is also earmarked to transform bus services, as part of the £3bn committed by the prime minister.  

This will deliver Transport for London-style improvements to speed up journey times, simplify fares and increase the number of services outside of the capital, the Treasury said. 

As part of the City Region Sustainable Transport Settlements, funding will be allocated for projects in Greater Manchester (£1.1bn), West Yorkshire (£830m), South Yorkshire (£570m), West Midlands (£1.1bn), Tees Valley (£310m), West of England (£540m) and Liverpool City Region (£710m).

Read more: FTSE 100 climbs as traders look ahead to UK Budget this week

This will enable projects such as cutting-edge carriages for Greater Manchester’s Metrolink, an expansion of tram networks in South Yorkshire and the West Midlands, and battery packs for Merseyrail trains to extend its network.

Investment in skills and young people

A raft of measures have already been announced along the lines of up-skilling the nation and improving education.

These include: 

— £3bn skills training investment for 16-19 year olds with T-levels and traineeships

— £2.6bn boost for children with special educational needs and disabilities

— £560m for maths coaching with ‘multiply’ programme

— £700m to improve sports and youth clubs

The investment in skills and training has been welcomed by business. 

“The Workplace Training and Development Commission, led by the BCC, has made it clear that considerable upskilling is needed to enable businesses across the country to grow and thrive," said Claire Walker, co-executive director at the British Chambers of Commerce. 

Read more: Budget 2021: Sunak faces making £2bn of spending cuts, says IFS

However, Walker warned that "solving the UK’s skills crisis will not happen overnight and will also require coordinated effort across business, government and the skills sector." 

"Local Skills Improvement Plans, currently being piloted, offer a real opportunity to match business need and local training for the longer term."

£703m for 'border protection'

Sunak will announce £703m over the next three years to improve the safety, security and efficiency of the UK border. 

More than £70m of that will be earmarked to replace the UK’s fleet of cutters and patrol vessels to safeguard Britain's shores. 

Alongside this, £628m will be used to to develop a world-leading digital border and immigration system bolstering national security, the Treasury said. 

Launching in 2023, new Electronic Travel Authorisations allow people to visit the UK for reasons such as tourism without requiring a visa. 

Sunak's Angels: £150m for regional angel investors

It is expected that the chancellor will announce a £150m pot of funding for the British Business Bank to encourage the development of regional networks of Dragon’s Den-style "angel investors" to help make people’s dreams of starting a business a reality.

The Regional Angels Programme was set up in 2019 following the government's Patient Capital Review to support the early-stage equity ecosystem outside of London. 

Read more: Budget 2021: Sunak to give £6bn to NHS

It operates UK-wide by developing clusters of angel investors and makes commitments of £5m to £15m alongside early stage investment funds and angel groups who, in turn, invest into seed and early stage businesses. This then acts as a catalyst for more investors to back regional businesses.

This is part of the government’s plan to "level up" the country by helping small businesses get access to the early funding they need to get off the ground and grow. Innovative start-ups in regions outside London often fail to get the funding they need to grow due to a lack of specialist investor networks in their areas.

The funding due to be announced at the Budget more than doubles the £100m previously announced.

Shipping tax gets a post-Brexit makeover

As the supply chain crisis drags on, the shipping industry tax system is set for post-Brexit overhaul.

In the first shake up the rules have had in over two decades, from April 2022 flying the UK flag will give global shipping companies more chance to be accepted when applying to join the UK’s Tonnage Tax Regime. 

Shipping companies investing in net-zero will also stand to benefit under new rules. 

Watch: What is inflation and why is it important?

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