What can we expect from this years autumn budget…
When is the Autumn Budget?
After last year’s Autumn Budget was scrapped because of the coronavirus pandemic, Chancellor Rishi Sunak will outline the government’s most recent tax and spending plans tomorrow in a budget that is aimed at the public sector and pandemic recovery.
Health of the economy
The Office of Budget Responsibility (OBR) will provide an update in the Gross Domestic Product (GDP) expectations for the year. It is also anticipated that the OBR will release forecasts showing a quicker economic rebound than the 4% predicted in the last budget.
The unemployment forecast is also expected to lower, with the furlough scheme proving to be a success throughout COVID-19.
New fiscal rules
The pandemic meant that the government had to borrow around £320 billion by year end April 2021, the highest amount in peacetime ever in this country.
With millions spent on the furlough scheme and reduced tax during the pandemic, the Chancellor is expected to announce new fiscal rules to bring down the national debt of almost 100% of GDP – its highest level since 1963.
National Insurance and dividend tax will be increased by the largest amount in twenty years, as announced in September by the Boris Johnson, rising by 1.25%.
With people and businesses still struggling from rising inflation, energy costs, furlough coming to an end and other COVID-19 support measures also closing soon – there is now pressure for Sunak to take further steps to ensure everyone’s economic safety.
This includes confirming that the yearlong ‘pause’ on public sector pay, which affected millions of teachers, police and civil servants, will be lifted.
He has also confirmed that the UK’s national living wage will rise from £8.91 to £9.50 an hour for workers aged 23 and over from April – a 6.6% increase.
There has also been talk of VAT being cut on household energy bills to combat this, with further calls for capital gains tax and inheritance tax to be raised.
It is planned for corporation tax to be raised from 19% to 25% in April 2023, however it has been argued that this could put the UK’s banking industry and financial services at a disadvantage against its foreign competitors – especially a problem since Brexit.
It is expected that the bank corporation tax surcharge will be lowered to 3% from the current 8% in April next year to combat this, charging banks less on their profits.
With an abysmal period for the hospitality sector throughout the pandemic lockdowns, the UK government had supported these businesses by temporarily cutting the rate of VAT to 5%. This has recently increased to 12.5% with plans for this to return to its original pre-COVID-19 rate of 20% from April 2022. The industry is hoping that this will be reversed and the current 12.5% can be made permanent.
It is suggested that the Chancellor could also cut alcohol taxes with the added pressures that hospitality firms are facing, with higher CO2 prices and labour issues.
Online shopping became everyone’s main form of shopping throughout the pandemic, and physical retailers that have been severely damaged in this time, are hoping for a reduction in business rates or a complete overhaul.
While it isn’t expected that this will be the case because of how costly it could become, it may be a possibility that the Chancellor will tax online shops further instead.
Sunak has made public transport a priority outside of London. Around £6.9 billion in funding has been pledged to improve bus services, expand tram networks, and upgrade train stations. It is expected, however, that only £1.5 billion will be available from this budget..
It has been discussed that Sunak could possibly place tariffs on long-haul flights for passengers.
At the moment, air passenger duty is split into two bands: flights over and under 2,000 miles. It is suggested that a third band will be introduced, with flight above 2,000 miles split into two bands of 2,000 to 5,500 miles and 5,500 miles and over.
In line with their new greener policies, this is to police the carbon footprint from the long-haul flights to destinations such as Australia and Japan.
There has been hearsay this week that the Chancellor has provided a budget of almost £2 billion to fast-track the number of houses being built on dilapidated, vacant land.
Around 160,000 greener homes are predicted to be built on brownfield land using these funds. This will support 50,000 jobs and help attain its goal of net zero by 2030.
It is also rumoured that the budget tomorrow may have further information and guidance on cladding.
The Autumn Budget will start around 12:30pm on Wednesday 27th and can be viewed on major news outlets or via Parliament Live TV.