Rishi Sunak’s Budget took the tax burden to its highest level since the Labour government of Clement Attlee in the 1950s.
Announced on Wednesday, the Chancellor said it had been necessary to take “corrective action” following the pandemic.
Mr Sunak said the measures he put in place to protect jobs when the crisis broke last year meant the economy was now recovering strongly while unemployment was far lower than many people had feared.
And he insisted that it remained his “ambition” to “lower taxes for people” when the fiscal conditions allowed but declined to be drawn on when that might be.
Here are the key points from his House of Commons address, as reported by Lancs Live.
1. £7bn business rates cut
The Chancellor said there will be a new 50% business rates discount in the retail, hospitality, and leisure sectors, with eligible concerns able to claim a discount on their bills of up to a maximum of £110,000.
Mr Sunak also announced reforms to business rates, including introducing more frequent revaluations every three years from 2023, relief for those adopting solar panels and a 12 month rate holiday on property improvements.
He said “We on this side of the House are clear that reckless, unfunded promises to abolish a tax which raises £25 billion every year are completely irresponsible.”
The Chancellor added: “First, we will make the business rates system fairer and timelier with more frequent revaluations every three years. The new revaluation cycle will be delivered from 2023.”
He went on: “We’re introducing a new investment relief to encourage businesses to adopt green technologies like solar panels. And I’m announcing today that we’ll accept the CBI and the British Retail Consortium’s recommendation to introduce a new ‘business rates improvement relief’.
“From 2023, every single business will be able to make property improvements – and, for 12 months, pay no extra business rates.”
Mr Sunak said his third step would be to cancel next year’s planned increase in the multiplier, adding: “I’m announcing today, for one year, a new 50% business rates discount for businesses in the retail, hospitality, and leisure sectors.”
Mr Sunak said the Budget “cuts business rates by £7 billion”.
2. Alcohol duty overhaul
Rishi Sunak said steps would be taken to deliver the “most radical simplification of alcohol duties for over 140 years”.
The Chancellor told MPs: “First, to radically simplify the system, we are slashing the number of main duty rates from 15 to just six.
“Our new system will be designed around a common-sense principle: the stronger the drink, the higher the rate. This means that some drinks, like stronger red wines, fortified wines, or high-strength ‘white ciders’ will see a small increase in their rates because they are currently undertaxed given their strength.”
Mr Sunak added many lower alcohol drinks are “currently overtaxed”, adding: “Rose, fruit ciders, liqueurs, lower strength beers and wines – today’s changes mean they will pay less.”
The Chancellor announced proposals for a new “small producer relief” to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).
In relation to sparkling wines, Mr Sunak said: “I’m going to end the irrational duty premium of 28% that they currently pay. Sparkling wines – wherever they are produced – will now pay the same duty as still wines of equivalent strength.”
3. ‘Draught relief’ for beer and cider
Mr Sunak also announced “draught relief” – a new, lower rate of duty on draught beer and cider.
The Chancellor told MPs: “It will apply to drinks served from draught containers over 40 litres. It will particularly benefit community pubs who do 75% of their trade on draught. Let me tell the House the new rate: draught relief will cut duty by 5%.
“That’s the biggest cut to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years. This is not temporary, it’s a long-term investment in British pubs of £100 million a year. And a permanent cut in the cost of a pint by 3p.”
Mr Sunak said the reforms will come into effect in February 2023.
On his final announcement on alcohol duty, the Chancellor said: “I can confirm that the planned increase in duty on spirits like Scotch Whisky, wine, cider and beer, will all, from midnight tonight, be cancelled. That’s a tax cut worth £3 billion.”
4. Fuel duty freeze
Rishi Sunak said the planned fuel duty rise would be cancelled.
He told MPs: “With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses.
“So I can confirm today the planned rise in fuel duty will be cancelled. That’s a saving over the next five years of nearly £8 billion.”
Responding to the fuel duty freeze, RAC fuel spokesman Simon Williams said: “We welcome the Chancellor’s confirmation that duty will continue to remain frozen at 57.95p a litre until next year. With pump prices at record highs, now would have been the worst possible time to change tack and hike up costs still further at the forecourt.”
5. Minimum wage increase
The Chancellor added public sector workers will also see “fair and affordable pay rises” across the whole Spending Review period.
He also confirmed an increase in the minimum wage next year to £9.50 an hour.
6. Universal Credit
Rishi Sunak announced an 8% cut to the Universal Credit taper rate.
He said: “The Universal Credit taper withdraws support as people work more hours. The rate is currently 63%, so for every extra £1 someone earns, their Universal Credit is reduced by 63p.
“Let us be in no doubt: this is a tax on work – and a high rate of tax at that.”
He added: “To make sure work pays, and help some of the lowest income families in the country keep more of their hard-earned money, I have decided to cut this rate, not by 1%, not by 2% – but by 8%.”
Mr Sunak said the tax cut would be worth more than £2 billion and would be introduced by no later than December 1.
7. Schools and colleges
Schools will get an extra £4.7 billion by 2024/25 with with just under £2 billion of new funding to help schools and colleges to recover from the pandemic.
Mr Sunak said: ““We are responding today with £300 million for a Start for Life offer for families, high-quality parenting programmes, tailored services to help with perinatal mental health, and, I’m pleased to tell (Conservative MP Fiona Bruce), funding to create a network of family hubs around the country too.
“To improve the quality of childcare, we’re going to pay providers more – with today’s Spending Review providing an extra £170 million by 2024-25.”
Mr Sunak said the Spending Review also provides “£4.7 billion by 2024-25” for schools.
He said: “Combined with the ambitious plans we announced at Spending Review 2019, this will restore per pupil funding to 2010 levels in real terms – equivalent to a cash increase for every pupil of more than £1,500.
“And for children with special educational needs and disabilities we’re more than tripling the amount we invest to create 30,000 new school places.”
The Chancellor went on: “We’ve already announced £3.1 billion to help education recovery. Today, as promised by the Prime Minister and Education Secretary, we will go further – with just under £2 billion of new funding to help schools and colleges – bringing this Government’s total support for education recovery to almost £5 billion.”
A UK-wide £560 million numeracy programme, Multiply, will be set-up to help improve basic maths skills among millions of adults, Rishi Sunak confirmed.
The Chancellor announced £300 million for “A Start for Life” parenting programmes, with an extra £170 million by 2024/25 going into paying for childcare.
9. Museums and galleries
Tax relief for museums and galleries will be extended for two years, to March 2024.
Rishi Sunak said creative tax reliefs would be made “more generous”, telling MPs: “On current plans, the tax relief for museums and galleries is due to end in March next year – just as exhibitions are starting to tour again, so I’ve decided to extend it, for two years, to March 2024.”
He added: “To support theatres, orchestras, museums and galleries to recover from Covid, the tax reliefs for all those sectors will – from today until April 2023 – be doubled.
“And they won’t return to the normal rate until April 2024.”
Mr Sunak said the tax relief for culture is worth almost quarter of a billion pounds.
Mr Sunak said £2.6 billion is committed via a “long-term pipeline” for more than 50 local road upgrades while more than £5 billion is being committed to local roads maintenance.
He told MPs: “Enough to fill one million more potholes a year.”
Mr Sunak said funding for buses, cycling and walking totals more than £5 billion adding: “The Prime Minister promised an infrastructure revolution – this Budget delivers an infrastructure revolution.”
11. Air Passenger Duty
The Chancellor said flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower rate of Air Passenger Duty from April 2023.
He said: “Right now, people pay more for return flights within and between the four nations of the United Kingdom than they do when flying home from abroad.
“We used to have a return-leg exemption for domestic flights but were required to remove it in 2001. But today I can announce 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.”
Mr Sunak added: “We’re also making changes to reduce carbon emissions from aviation. Most emissions come from international rather than domestic aviation.
“So I’m introducing, from April 2023, a new ultra long haul band in air passenger duty – covering flights of over 5,500 miles, with an economy rate of £91.
“Less than 5% of passengers will pay more, but those who fly furthest will pay the most.”
12. ‘Levelling Up Fund’
Rishi Sunak said he was allocating the first round of bids from the “Levelling Up Fund”, noting it would be £1.7 billion to “invest in the infrastructure of everyday life in over 100 local areas”.
He added: “With £170 million in Scotland, £120 million in Wales, and £50 million in Northern Ireland – more than their Barnett shares. This will benefit the whole United Kingdom.”
Mr Sunak said the Government is backing projects in Burnley, Aberdeen, Bury, Lewes, Clwyd South and Stoke-on-Trent – along with Labour areas of Ashton under Lyne, Doncaster, South Leicester, Sunderland and West Leeds.
13. £150bn extra spending
The Budget increases total departmental spending over the Parliament by £150 billion.
Mr Sunak said: “That’s the largest increase this century, with spending growing by 3.8% a year in real terms. As a result of this Spending Review, and contrary to speculation, there will be a real terms rise in overall spending for every single department.”
On resource spending on health care, Mr Sunak said: “Today’s Spending Review confirms that by the end of the Parliament, it will increase by £44 billion to over £177 billion.
“And the extra revenue we’re now forecast to raise from the Health and Social Care Levy is going direct to the NHS and social care as promised.”
14. Local government funding boost
Local government will get new grant funding over the next three years of £4.8 billion, the largest increase in core funding for over a decade.
15. Devolved administrations given the ‘largest block grants’ since 1998
Rishi Sunak also said, through the Barnett formula, the UK Government’s decisions would increase Scottish Government funding “in each year by an average of £4.6 billion, Welsh Government funding by £2.5 billion, and £1.6 billion for the Northern Ireland Executive”.
“This delivers, in real terms, the largest block grants for the devolved administrations since the devolution settlements of 1998,” he told MPs.
16. Courts, prisons and probation services
The Chancellor said he is providing an extra £2.2 billion for courts, prisons and probation services, including £500,000 to reduce the courts backlogs.
17. Overseas aid spending
Mr Sunak Sunak said UK aid spending is expected to return to 0.7% of national income by 2024/25.He said: “I told the House that when we met our fiscal tests, we would return to spending 0.7% of our national income on overseas aid.
“Some people said this was a trick or a device. I told this House – it was no such thing. And based on the tests I set out, today’s forecasts show that we are, in fact scheduled to return to 0.7 in 2024/25 – before the end of the Parliament.”
18. Brexit and shipping
Rishi Sunak said Brexit offered the UK the chance to deliver a “simpler” and “fairer” tax system, explaining he would reform the tonnage tax regime linked to shipping.
He told MPs: “When we were in the old EU system, ships in tonnage tax were required to fly the flag of an EU state. But that doesn’t make sense for an independent nation.
“So I can announce today that our tonnage tax will – for the first time ever – reward companies for adopting the UK’s merchant shipping flag, the Red Ensign. That is entirely fitting for a country with such a proud maritime history as ours.”
The Chancellor said core science funding will rise to £5.9 billion a year by 2024-25, a cash increase of 37%.
20. Research and development
Mr Sunak confirmed the Government will maintain its target to increase research and development (R&D) investment to £22 billion, telling MPs: “But in order to get there, and deliver on our other priorities, we’ll reach the target in 2026-27 – spending, by the end of this Parliament, £20 billion a year on R&D. That’s a cash increase of 50%.”
He added: “I can confirm for the House that this £20 billion is in addition to the cost of our R&D tax reliefs.
“Combined with those tax reliefs, total public investment in R&D is increasing – from 0.7% of GDP in 2018 to 1.1% of GDP by the end of the Parliament.
“How does 1.1% compare internationally? Well, the latest available data shows an OECD average of just 0.7%. Germany, investing 0.9%. France, 1%. And the United States, just 0.7%.”
Mr Sunak said he will consult on further changes to the regulatory charge cap for pensions schemes in a bid to “unlock institutional investment while protecting savers”.
21. HGV levy suspended until 2023
Rishi Sunak said he would be extending the suspension of the HGV levy until 2023, while freezing vehicle excise duty for heavy goods vehicles.
He said: “We’ve already suspended the HGV levy until August and I can do more today – extending it for a further year until 2023, and freezing Vehicle Excise Duty for heavy goods vehicles.”
He added the Budget will offer “further support for working families” and the Government’s fiscal policy will “keep in mind the need to control inflation”.
Mr Sunak said: “I have written to the Governor of the Bank of England today to reaffirm their remit to achieve low and stable inflation.”
22. Inflation ‘likely to rise further’
The Chancellor said inflation was 3.1% in September and is “likely to rise further”, noting the Office for Budget Responsibility expects CPI to average 4% over next year.
He said “demand for goods has increased more quickly than supply chains can meet” as economies around the world reopen, while global demand for energy has also “surged”.
Mr Sunak said: “In the year to September, the global wholesale price of oil, coal and gas combined, has more than doubled. The pressures caused by supply chains and energy prices will take months to ease.
“It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with finance ministers around the world and it’s clear these are shared global problems, neither unique to the UK, nor possible for us to address on our own.”
23. Unemployment and economic forecast
The OBR expects the UK’s “recovery to be quicker” with the economy returning to its pre-Covid level at the turn of the year.
Mr Sunak explained : “They forecast the economy to return to its pre-Covid level at the turn of the year – earlier than they thought in March.
“Growth this year is revised up from 4% to 6.5%. The OBR then expect the economy to grow by 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years.
“In July last year, at the height of the pandemic, unemployment was expected to peak at 12%. Today, the OBR expect unemployment to peak at 5.2%.
“That means over 2 million fewer people out of work than previously feared.”
Mr Sunak said the OBR has “revised down their scarring assumption from 3% to 2%”, adding he would publish a new Charter for Budget Responsibility – which MPs will be asked to vote on.
24. Borrowing and debt
The Chancellor said borrowing as a percentage of GDP is forecast to fall, from 7.9% this year to 3.3% next year, then 2.4%, 1.7%, 1.7% and 1.5% in the following years.
On the vote on his fiscal responsibility charter, Mr Sunak said MPs would face a “simple choice”.
He told the Commons: “To abandon our fiscal anchor and leave our economy adrift with reckless unfunded pledges, or to vote for what we on this side of the House know is the right course – sound public finances and a stronger economy for the British people.”
Mr Sunak said the OBR report today shows the Government has met all of its fiscal rules.
He went on: “Underlying debt is forecast to be 85.2% of GDP this year, then 85.4% in 2022/23, before peaking at 85.7% in 2023/24. It then falls in the final three years of the forecast from 85.1% to 83.3%.”
On borrowing, Mr Sunak said: “Borrowing as a percentage of GDP is forecast to fall in every single year. From 7.9% this year to 3.3% next year, then 2.4%, 1.7%, 1.7% and 1.5% in the following years.”
25. Tax breaks update
Rishi Sunak said now is “not the time to remove tax breaks on investment”, telling MPs: “I can confirm today that the £1 million Annual Investment Allowance will not end in December as planned – it will be extended all the way to March 2023.”
The Chancellor also explained he had previously announced a review of the bank surcharge within corporation tax.
He said: “We will retain a surcharge of 3%. The overall corporate tax rate on banks will, in 2023, increase from 27% to 28%, and will remain higher than the rate paid by other companies.
“Small challenger banks are improving banking competition, which is good for the sector and good for consumers. So to help them, I will also raise the annual allowance to £100 million.”
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