- Inflation levels can touch 4% next year as per OBR estimates.
- The economy will grow by 6.5% this year and will bounce back to its pre-pandemic size by 2022.
- Unemployment is set to peak at 5.2%.
Chancellor of the Exchequer Rishi Sunak has announced the Autumn Budget in the House of Commons on Wednesday. His speech began with a briefing on building a new economy post Covid. Tax and spending plans for transport, health and education etc. have been revealed.
The impact of the global supply chain disruptions on the UK has augmented due to Brexit, as per fiscal watchdog OBR. Although a successful vaccine rollout has helped in reopening of the economy, the supply bottlenecks still exist amid soaring energy prices and labour shortfall.
Let’s take a brief look at the top 10 highlights of the budget.
- The chancellor said that the UK economy is getting negatively impacted by rising inflation, and the Office for Budget Responsibility (OBR) has predicted the inflation levels to average 4% next year.
He added that rising inflationary pressure is a global phenomenon as of now, but the Boris Johnson government will take necessary steps to provide support to households.
- According to the OBR forecasts, the economy is expected to grow by 6.5% this year, and by 2022 the economy will bounce back to its pre-pandemic size. GDP growth will be 6% next year, and 2.1%, 1.3% and 1.6% in 2023, 2024 and 2025 respectively. The pandemic has scarred the economy for a long-term, but the OBR has revised its estimates for the same from 3% to 2%. Going down from a forecast of around 12% in July last year, unemployment is set to peak at 5.2%.
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- New fiscal rules are being set up for better management of the public finances with the aim of reducing debt as a percentage of GDP. The borrowing in the next financial year 2022-23 will be 3.3% of the GDP, going down from the present 7.9%. A budget deficit of £233.9 billion for 2021-22 was forecasted by the OBR in March budget, which accounts for 10.3% of GDP and these high debt levels are expected to fall as a share of national income in future.
- Sunak has reviewed the spending of the Government, which will lead to a real term rise for all departments. A £150 billion increase will be seen in departmental spending, growing by 3.8% per year in real terms. Grant funding worth £4.8 billion will be given out to local government.
- Funding per pupil is set to increase and bounce back to 2010 levels. For each pupil, there will be an increase of around £1,500. Sunak also confirmed that the Government is planning to triple its investments for creation of 30,000 special school places. Total support of worth £5 billion will be provided to normalise the education sector after being hit by the pandemic and scarcity of funds. Over £200 million will be spent on holiday activities and food for school pupils.
- The first grants worth £1.7 billion have been announced by Sunak from the Treasury’s Levelling Up Fund. This funding will be for towns and cities and the funds will be allocated to constituencies under the Labour leadership. There will be revival of libraries, museums, and galleries in cities like Leeds, Doncaster, and Leicester.
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- Investments will increase in infrastructure as the Chancellor said that London-style transport will be created across England. Around £21 billion will be invested by the Government on roads, and to reduce the commuting time between cities, £46 billion will be invested on railways. Apart from infrastructure, investment in R&D is also set to rise to £22 billion by 2026-27, which will be two years later than planned earlier. By 2024-25, £20 billion will be invested in R&D, with the aim of making UK a global science superpower.
- Social care will receive its biggest hike in budget for over a decade, says Sunak. Health spending will increase to more than £177 billion, jumping up by £44 billion. Around £11.5 billion will be invested for building 180,000 affordable homes. Total investment in housing will be around £24 billion. Additionally, a £5 billion fund will be created to get rid of unsafe cladding by imposing a 4% levy on developers whose profits are over £25 million.
- A five-step plan has been announced to overhaul the alcohol duty. The number of main duty rates have been cut down from 15 to 6, and the rates of tax will be directly proportional to how strong the drinks are. Duty premium ends on sparkling wines and fruit cider. There has been a 5% cut on the rate of duty on draft beer and cider. The duty on spirits won’t rise as planned earlier.
- Fuel duty will be frozen for the twelfth consecutive year, which means that the cost of an average tank of fuel will be cut down by £15 per car, by £30 per van, and by £130 for HGVs as compared to the pre-2010 plans. The tax set up of the shipping industry is also prepared for a post-Brexit overhaul and the shipping companies aligned with UK’s net-zero goals will benefit from the new rules.