In his usual upbeat manner, the UK Chancellor, Rishi Sunak, told us that his Autumn Budget speech “delivers a stronger economy for the British people, stronger growth, with the UK recovering faster than our major competitors.” Peter Webb, Head of Tax Advisory, explores the key announcements in more detail.
The three biggest goals the Chancellor needed to achieve with his Budget speech were:
- Support the recovering economy
- Support people who are struggling in the ongoing pandemic
- Show that the UK is doing its part to tackle man-made climate change
So how did he do?
Support for the recovering economy
Rishi Sunak announced a slew of government spending plans with a rise of £150bn “over the course of this parliament”. A welcome commitment to increase spending on science to £20bn a year was one of the headline grabbers here.
Business rates will be retained but will be reformed and the expected consultation on an Online Sales Tax is a promise to help bricks and mortar retail businesses obtain a competitive parity with their online counterparts. In the meantime, the announcement of a 50% business rates discount for the retail, hospitality, and leisure sectors in England in 2022-23, up to a maximum of £110,000 is a welcome relief for some of the hardest hit businesses.
A reduction in alcohol duty on draught beer, cider and on sparkling wines was the rabbit Rishi Sunak pulled out of his hat and, if the pictures of the Chancellor being mobbed in a pub after his Budget speech are anything to go by, will certainly be a boost to the hospitality sector.
2021 Autumn Budget Summary
Read our more detailed overview of the announcements here.
Support people who are struggling in the ongoing pandemic
The national living wage will increase by 6.6% to £9.50 next year. However, the £20 a week cut to universal credit was not reversed, instead a tweak was made to the universal credit taper rate. This is, effectively, a reduction in welfare benefits that targets the most vulnerable in society. The Guardian estimates that 5.5 million people have lost income as a result of this cut to universal credit.
With spiralling energy costs the Chancellor did not take the opportunity to reduce VAT on domestic heating fuel; but the planned rise in fuel duty was cancelled. With living costs forecast to rise by 4% over the next year a reduction or abolition of VAT on domestic heating fuel was hoped for.
Don’t forget the rises in National Insurance contributions and dividends tax announced last month and the freeze in tax allowances until 2026 announced in March this year. The bottom line is that we will all be paying more taxes in the years ahead even though headline rates of tax were not raised in this latest Budget statement.
Show that the UK is doing its part to tackle man-made climate change
At the COP summit in Glasgow next week the UK will be showing the world that we are leading the way on decarbonising our economy and restoring nature. It is very much open to question whether or not cutting fuel duty, announcing significant spending on expanding the road network and reducing taxes on domestic flights sends the right signals just a few days before the summit.
In summary
It is harsh to judge Rishi Sunak against the three goals I set out for him; after all we are still in the midst of the biggest crisis we have faced in a generation. But the ultimate test for me is will this Budget make me better off or at least make me feel as though I am better off? I am not sure it passes either of those tests.
To discuss any aspect of your own tax or financial affairs please contact your nearest office.
