Following weeks of speculation, the Autumn Budget has now taken place. As expected, Chancellor Rishi Sunak presided over a stronger economy, focusing on growth, employment and reducing national debt.
Acknowledging that we are not out of the woods yet, Sunak announced plans for growth after a challenging 18-months, both economically and socially.
With inflation now over 3% and CPI expected to rise to above 4% over the next year, thanks to supply and demand imbalances, prices have risen across the board. While this is a global problem, Sunak is looking to accelerate visa applications to help with driver shortages, as well as suspending duties on HGV and has reaffirmed to the Bank of England his endeavors to keep a low and stable rate of inflation.
The Office for Budget Responsibility forecast the performance of the UK economy will return to its pre-Covid level by the New Year, with forecast growth of 6% in 2022. Sunak believes that the OBR’s forecasting around jobs, wage rises and GDP growth indicates that the Conservative government is making the right decisions on public finances.
In the interest of being fiscally responsible, the Chancellor is aiming to meet everyday spending through taxation and borrowing to invest in the future.
There is also the expectation that foreign aid spending will return to 0.7% in 2024/25 and increasing funding to healthcare by almost £6bn. Packages for housing and schools/childcare were also allowed for in the review.
Long-term growth is being targeted, and the Chancellor is looking to balance investment to the wider economy as well as targeting innovation, with the intention to make the UK a ‘science superpower’, offering further tax incentives for UK based R&D.
Post-Brexit tax regimes look to be changing for shipping and air-passenger duties, particularly on internal-flights (pointed out to be controversial in prioritizing this over high-speed rail with COP26 just around the corner), and increasing tax on long-haul flights that produce higher levels of emissions.
Large amounts of spending have been announced, and no mention of large tax rises aside from increases in Corporation Tax earlier in March, and the Social Care Levy in September, though it has been acknowledged that tax rates are already high. Business Rates are here to stay, but with the view to tweak the system to make this fairer, and discounts offered to sectors hardest hit by Covid.
Also noteworthy is reducing the Universal Credit taper by 8%, viewed as a very high rate of tax for individuals looking to work more. The Conservative Government is also looking to increase the National Living wage to £9.50 from next year.
Keir Starmer was not available to respond, having tested positive for Covid. Standing in was Rachel Reeves, the Shadow Chancellor, continuing to challenge high rates of tax on individuals rather than big business, inflation putting pressure on families, and their view that there has been a decline in public services and a lower growth economy under the current Government.
Whilst this isn’t an opinion piece (particularly on political views), it is also interesting to see the Chancellor looking to simplify taxes from old laws, some dating back to the 1600’s. Many will be celebrating the reduction in alcohol duties on sparkling wine by popping a bottle of Prosecco, or a drink on draught at their local pub, however, one does wonder whether we are on the precipice of further tax changes, with the Chancellor having already commissioned reports from the Office for Tax Simplification.
The Budget has set out the Governments planned changes to spending, as well as an indication of the overall economic outlook which impacts us all as individuals, and our financial planning. If you would like to discuss your own financial planning requirements further and wish to arrange a free initial consultation, please contact us on 01604 621 421.
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