Chancellor Rishi Sunak’s Autumn Budget 2021 has the highest taxes since the 1950s and will see households considerably worse off by 2026, living standards think tank Resolution Foundation has warned. A study showed that tax will reach its highest level as a share of the economy since 1950 by 2026-27. This is equal to a £3,000 increase per household since Boris Johnson took office as prime minister. It cannot be ruled out that after changes in the universal credit, three-quarters of families on the benefit are set to lose more from the £20 cut than they gain from his new measures.
Analysis suggests that to allow households to keep 8p more per pound they earn on the benefit, it would offer a big boost for some households who are able to work, but they will be “overshadowed” by the much larger £6bn cut.
Meanwhile, inflation will increase as weak pay growth will cause real wages to fall next year. The UK’s stagnant living standards “remain the dominant feature of this era” the think tank said.
Critiquing Sunak’s budget, Torsten Bell, chief executive of the Resolution Foundation told The Independent, “Higher taxes aren’t a surprise given the UK is combining fiscal conservatism with an ageing society and a slow-growing economy. But it is the end of low tax conservatism, with the tax take rising by £3,000 per household by the middle of this decade.”
Sunak’s “multi-year housing settlement totalling nearly £24billion” was a major highlight of his Autumn Budget 2021. Mr Sunak said this will “meet our commitment to invest 10 billion pounds in new housing and unlock a million new homes.” He continued: “We're also confirming £5billion to remove unsafe cladding from the highest risk buildings, partly funded by the residential property developers’ tax which I can confirm will be levied on developers with profits over £25million at a rate of four percent.” He said: “But we will go further with £640million a year for rough sleeping and homelessness.”
Long Haulers and Households lose
A new "ultra-long-haul" rate of air passenger duty of £91 for journeys of more than 5,500 miles will be introduced. The other rates will be £13 for journeys of 0 to 2,000 miles and £87 for those of 2,000 to 5,500 miles. The chancellor has not scrapped the 5pc VAT paid on domestic bills to help families to tackle rising bills. No new money announced to protect leaseholders to protect them from becoming victims of cladding.
Despite all criticism, the Chancellor aims to build a stronger economy for the British people.Delivering the Budget and Spending Review, Rishi Sunak set out a plan to invest in stronger public services, with total departmental spending growing by £150 billion a year in cash terms by 2024-25, a £90 billion real-terms increase, which is the largest real-terms increase in overall departmental spending for any Parliament this century.
Strong and innovative public services
In addition to the historic set of spending commitments already announced for the NHS, which mean NHS England’s day-to-day budget is set to grow by 3.8% on average in real terms each year over the SR21 period, Mr Sunak announced £5.9 billion to tackle the NHS backlog of non-emergency tests and procedures, modernise digital technology and ensure there are at least 100 community diagnostic centres to help people across England get health checks, scans and tests closer to their homes.
To support pupils and teachers, an additional £4.7 billion will be invested in the core schools budget in England, over and above the SR19 settlement for schools in 2022-23 – in addition to £1.8 billion of new money for education recovery and catch-up over the next three years. An investment of £11.5 billion will help build up to 180,000 affordable homes – with 65% of the funding for homes outside London.
Levelling Up the UK
To deliver on the commitment to level up the whole UK and help ensure people’s opportunities in life are not determined by where they live, today’s announcement includes £5.7 billion for London-style transport settlements in English city regions over five years including Greater Manchester, Liverpool City Region and the West Midlands.
The Spending Review confirms £2.6 billion between 2020-2025 for a long-term pipeline of over 50 local roads upgrades, over £5 billion for local roads maintenance; and funding for buses, cycling and walking totalling more than £5 billion in England over the Parliament.
The allocation of the first round of the UK-wide Levelling Up Fund sees £1.7 billion of local investment in local areas, while the launch of the over £2.6 billion UK Shared Prosperity Fund focussed on funding programmes to help people into jobs and get on in life.
On top of this the first 21 projects will receive funding from the £150 million Community Ownership Fund, helping communities across the UK protect and take ownership of their most treasured local community assets.
The way to level up our country is not to level down London
However, London Mayor Sadiq Khan has gone on record to say that the government has “taking the capital for granted” and “Without a London recovery, there will be no national economic recovery. It is particularly disappointing the Chancellor has chosen to not allocate any future funding to Transport for London (TfL). For every £1 invested on the London Underground, 55p is paid to workforces located outside London, with TfL contracts contributing around £6.4bn to the economy overall.”
Speaking to Asian Voice, the London Mayor said, “It's really important for the government to realise that London, as a region, contributes to the treasury, which is about £40billion net more than we take back. So if the government wants a national recovery, they need London, we find that all cylinders. And I'm quite clear, London is the greatest thing in the world but can't be complacent. So our ability to create wealth and prosperity in the financial sector, in the legal sector, in the cultural sector, in the tech sector, in life sciences, isn't going to happen by itself. It happens, it's hard work. And sometimes the government is working with us to make sure we can have a good recovery after the last 18 months caused by the pandemic. Pandemic has caused all challenges to London's economy. We need the government's help in relation to tourism, transport, housing, and infrastructure. The way to level up our country is not to level down London.”
Supporting people and businesses
Building on the success of the Plan for Jobs, the Budget and Spending Review will continue supporting people into work with over £6 billion of funding for the Department for Work and Pensions (DWP) over the next three years to help people earn more and gain the right skills.
To boost wages and prospects for all, skills funding will increase by a total over the parliament of £3.8 billion compared to 2019-20. This will quadruple the number of places on Skills Bootcamps, expand the offer on free Level 3 qualifications and launch the new Multiply scheme to improve numeracy skills across the UK for up to 500,000 adults.
To ensure that work pays, the government is increasing the National Living Wage to £9.50 from April 2022, cutting the Universal Credit taper rate from 63p to 55p and increasing Universal Credit work allowances by £500 per year.
To support parents, £302 million will fund new early years programmes including bespoke breastfeeding services and parent-infant mental support, and funding to rollout Family Hubs across England.
And to help up to 300,000 more families facing multiple needs, there will be an extra £200 million invested in the Supporting Families programme.
To help high streets to adapt and recover, there will be a new temporary business rates relief for eligible retail, hospitality and leisure properties in England and the government is freezing the business rates multiplier for a further year, a tax cut worth £4.6 billion over five years.
Chancellor’s strategy has been predicated on a sustained economic recovery
Anjum Khan, director of the Asian Business Chamber of Commerce, told the newsweekly, “All in all it was a decent budget for businesses but worth noting that corporation tax and NI increases still remain on the horizon. The Chancellor was able to introduce a number of favourable tax cuts that will ultimately help those businesses that are still struggling with the effects of the pandemic. The Chamber has been calling for reform of the outdated business rates system and it was pleasing to see the announcement of more frequent valuations, incentives to encourage green investment and a freezing of the multiplier. It was also good to see that business rates would be slashed for those operating in the hospitality, retail and leisure sectors. Nevertheless, much of the Chancellor’s strategy has been predicated on a sustained economic recovery and as he admitted himself, the spectre of higher Covid case rates and a sharp rise in inflation could still cause huge problems for businesses during the winter. In light of this, we would urge the Treasury to commit to an appropriate level of financial support if national restrictions are re-introduced otherwise a number of businesses could be left facing a bleak future.”
The road is an uncertain one
Rita Trehan, an award-winning business expert who has led business transformation initiatives at Coca Cola and the World Bank. Rita is from a family of entrepreneurs in East London and is a founder of Dare Worldwide. Commenting on the Autumn Budget 2021, she told Asian Voice, "The budget leaves me feeling cautiously optimistic, but there are many questions that need clarity, not least with business rates. The consulting work I do for clients can happen anywhere, but I still need a physical office, so I welcome the prospect of business rates reform. However, I am yet to know what this reform will ultimately look like. Business rate discounts for the hospitality and retail sector is also a welcome boost for the high street, as is green rates relief. Yet the increase next year in corporation tax for SMES making profits of over £250k is troubling. Furthermore, the OBR still forecasts sluggish wage growth, which will do little to alleviate the worker shortage in some sectors. The economy more widely is showing signs of recovery, but the road is an uncertain one, with inflation a notable concern. It's important that businesses look after their staff in these challenging times and help them to have a say in the strategic direction of their company. So how will the budget affect my businesses? It remains to be seen but there are grounds to be positive as we slowly come to terms with the pandemic."
*****
Key features of the Autumn Budget 2021
Stealth Tax and the Health and Social Care Levy (HSCL) – The previously announced freezing of tax allowances and thresholds for income tax and the introduction of the new HSCL are due to raise very large amounts of revenue over the next five years. These, together with the increase in dividend tax, provide a crucial backdrop to the spending increases and tax changes announced in the Autumn Budget.
Capital Gains Tax change – From 27 October 2021, the deadline for residents to report and pay capital gains tax after selling UK residential property will increase from 30 to 60 days after the completion date. For non-UK residents disposing of property in the UK, this deadline will also increase from 30 to 60 days.
Business Rates cut – Up to 400,000 retail, hospitality and leisure properties will be eligible for a temporary new £1.7 billion of business rates relief from April 2022. The business rates multiplier will be frozen in 2022/23, which will mean business rates bills will be 3% lower than without the freeze.
From 2023, under a new business rates relief no business will face higher business rates bills for 12 months after making qualifying improvements to a property they occupy.
National Living Wage increase confirmed – A 6.6% increase to the National Living Wage to £9.50 an hour, starting on 1 April 2022, was confirmed. Young people and apprentices will also see increases in National Minimum Wage rates.
Annual Investment Allowance extended – The Annual Investment Allowance will remain at £1 million until 31 March 2023.
Alcohol Duties reforms – Drinks will be taxed according to their alcohol content, with higher strength products incurring proportionately more duty with a standardised set of bands.
Air Passenger Duty – A new domestic band for air passenger duty for 2023 will be set at £6.50 for flights between airports in England, Scotland, Wales and Northern Ireland (excluding private jets).
Universal Credit – While not the U-turn some had hoped for, the taper on Universal Credit, which has meant 63p of every £1 of benefit could end up being lost to claimants, will be cut to 55p by 1 December.
