In his Budget speech, chancellor Rishi Sunak pledged to increase spending on public services, with the economy enjoying higher growth than previously expected.
In spending plans that he said would give rise to a new post-Covid economy, Sunak said that total departmental spending would go up by £150 billion over the course of this Parliament, equating to real terms increase across the board.
Some announcements had been made ahead of the Budget, including more funding for the NHS, a rise in the National Living Wage and the end of the public sector pay freeze.
Sunak has been able to increase spending after the UK economy was forecast to return to pre-Covid levels by 2022. Annual growth is set to rebound by 6.5 per cent this year, consolidated by six per cent next year.
Borrowing as a percentage of GDP is forecast to fall to 3.3 per cent in 2022, having stood at 7.9 per cent this year. Over the following four years, this statistic is expected to recede to just 1.5 per cent.
While wages have grown by 3.4 per cent in real terms since February 2020, estimates suggest that inflation is likely to hit four per cent. This has prompted Sunak to ease the cost-of-living crisis by cutting the Universal credit taper rate by eight per cent [63 per cent to 55 per cent], a move which will be implemented no later than December 1. The chancellor has also pledged to retain and reform business rates, while a planned increase in fuel duty will not go ahead amid rising prices.
A total of £24 billion has been set aside for housing, with £11.5 billion of that going into the development of 180,000 affordable homes.
In terms of infrastructure, £21 billion will be committed to roads and £46 billion to railways, with the government promising to invest £5.7 billion into London-style transport networks across city regions. Cycling infrastructure and local minor roads will benefit from £5 billion of funding each.
There was also extra money for schools, with an additional £4.7 billion promised by 2024/25 which will see schools’ resources return to 2010 levels in real terms. £2 billion of new funding will also be provided to help Britain’s educational institutions recover from the effects of Covid, and £300 million is to be invested into ‘Start for Life’ parenting programmes. Childcare has been promised a further £170 million in funding by 2024/25.
The aviation sector, one of the worst affected by Covid, will enjoy a cut in Air Passenger Duty for domestic flights, set to come in from April 2023. This will coincide with a new Air Passenger Duty band being introduced for flights covering more than 5,500 miles.
Meanwhile, the provision of financial support for England’s airports - introduced during the pandemic - has been extended for an additional six months.
The chancellor has also sought to help the hospitality industry by cancelling a planned increase on spirit, wine, cider and beer duty, which he said will bring beverage prices down.
A new, lower rate of duty on draught beer and cider will be introduced, cutting rates by five per cent. Other low alcoholic beverages such as rose wine, fruit ciders, liqueurs, lower strength beers and wines will see their rates decrease, while stronger and fortified wines and high-strength ciders will be in line for a small increase. Sparkling wine drinks will not be liable to the same rate of duty as wines of equivalent alcoholic volume.
There will be a 50 per cent cut in business rates for hospitality over the course of one year, and adjustments made to the business rates multiplier to lower business rate bills by just under £1 billion per annum. Over five years, this will equate to a £7 billion tax cut for the sector.
Museums and galleries, also hit by the pandemic, have had their tax relief extended by two years, running up to March 2024.
Elsewhere, the UK justice system will receive a £2.2 billion boost which will be injected into courts, prisons and probation services, and core science funding is to increase to £5.9 billion per year by 2024/25.
For the devolved administrations, funding is set to increase by an average of £4.6 billion for the Scottish government, £2.5 billion for the Welsh government, and £1.6 billion for the Northern Ireland Executive.
Image sourced from Wikimedia Commons
