Chancellor Rishi Sunak delivered the Autumn Budget speech yesterday, marking the second budget of the year but the first of Sunak's that's not primarily dominated by Covid spending.
The budget appears to be driven by the revised forecasts from the OBR, which gave the Chancellor more fiscal headroom than anticipated. These are the key metrics to track rather than the alcohol, fuel and air duty changes as these will influence the government economic policy to a larger degree.
Nothing relating to personal wealth was mentioned at all and what was anticipated by commentators didn't happen such as alterations to pension, CGT allowances and the structure of inheritance tax. This is probably a good thing for the time being, however, this does not mean it has gone away for good.
The team at Sutton Winson Wealth Management listened yesterday afternoon, and have summarised the main points below.
The OBR have predicted that the UK will now have a swifter and more sustained recovery than initially predicted in November 2020.
- 2021: 6.5% growth this year, up from 4.0% forecast in March’s Economic and fiscal outlook
- 2022: 6% growth, down from 7.3% forecast in March
- 2023: 2.1%, up from 1.7% forecast in March
- 2024: 1.3%, down from 1.6% forecast in March
- 2025: 1.6%, down from 1.7% forecast in March
Inflation hit 3.1% in September and is expected to Average 4% over the next year.
Today's forecast is substantially under the previous forecast from March 2021. The current forecast assumes that the worst of Covid is behind us and the 2021/22 borrowing requirement is reduced by £51 billion. It is forecast to reduce rapidly down to 46 billion in 2024/25 and then stay very low by historic standards in the subsequent 2 years. The "saving" from the lower forecast is what the Chancellor has used to fund the giveaway budget.
Unemployment is expected to peak at 5.2%, a large change to the expectation last year of a peak of 12% and then stay relatively stable at around 4.2% through to 2026.
The new forecast revised down the level of debt by about 8-9 billion peaking in 2023/24 at 86 billion and then declining thereafter. This all presupposes that there is not another wave of a Covid variant with the usual economic disruption and potential lockdown.
Business rates will see a 50% discount for retail, hospitality and leisure which are the sectors most affected by Covid. This is a levelling up for businesses on the high street against their internet based competitors.
- £1.5bn invested in brownfield land to bring it into use
- £11.5bn invested to construct 180,000 new affordable homes
- Levy on property developers to fund rectification of cladding issues on homes.
Schools & Health Care
- Health Capital Budget highest in since 2010
- Resource spending on health care by the end of the Parliament will increase by £44 billion to over £177 billion
- Spending per pupil in schools to return to 2010 levels.
- Fuel duty rise cancelled
- Simplification of alcohol duty with rate based on ABV
- Annual investment relief in plant and machinery increase to £1m extended through March 2023
- Banking Levy maintained at 3%, with a challenger bank exemption up to £100m.
Universal Credit Taper
Universal Credit (UC) Taper Rate reduced from 63% to 55%. The Chancellor made this his final announcement as it goes some way towards replacing the extra £20 of UC which was a temporary Covid measure.
Note: This information is based on our current understanding of the autumn 2021 Budget. For any further information on any of the points above, please do not hesitate to get in contact with a member of our SWWM team on 0330 008 5555.
Sources: BBC, Sky News, Express