Autumn Budget Statement 2021

Preparing the country for an ‘age of optimism’

The Chancellor of the Exchequer, Rishi Sunak, delivered his Autumn Budget and Spending Review 2021(SR21) to Parliament on Wednesday 27 October 2021.

The Autumn Budget and SR21 take place as the country focuses on recovering from a period of unparalleled global economic uncertainty and challenge to move towards a more promising future.

With the economic recovery underway and emergency support winding down, the Autumn Budget and SR21 set out the government’s plans over the rest of the Parliament. The SR21 sets departmental budgets up to 2024/25.

At the heart of these plans is the government’s ambition to level up, reducing regional inequality so that no matter where in the UK someone lives, they can reach their full potential, find rewarding work and take pride in their local area.

The optics of the Autumn Budget were that taxpayers’ money will be spent where it makes the most difference to people’s daily lives: creating high-wage and high-skilled jobs, reducing NHS waiting lists, putting more police on the streets, upgrading roads and railways, and building new homes, hospitals and schools.

The pandemic has demonstrated the risk of unforeseen shocks and there remains uncertainty around the path of the virus. The Chancellor admitted the months ahead will be ‘challenging’. He said: ‘The Budget does not draw a line under COVID’ but he declared it will pave the way for a ‘new economy post-COVID’.

Mr Sunak said employment is up and investment is growing, outlining that the UK is ‘recovering faster than major competitors’. He announced he would prepare the country for an ‘age of optimism’.

 Key announcements from Chancellor Rishi Sunak’s Autumn Budget speech

Chancellor of the Exchequer, Rishi Sunak, outlined the government’s spending plans to Parliament in the Autumn Budget and Spending Review 2021(SR21) on 27 October 2021 to help the UK economy recover following the global COVID-19 pandemic.
Mr Sunak said the Budget will focus on the ‘post-COVID’ era but was keen to stress that the government is aware that the battle with COVID is not over. These are the key announcements from the Chancellor and what he had to say.

State of the economy and public finances

Growth
  • Annual growth for the UK economy is set to increase by 6.5% in 2021, followed by growth of 6.0% and 2.1% in 2022 and 2023 respectively
  • The Office for Budget Responsibility (OBR) expects the UK economy to regain its pre-pandemic size around the turn of the year, earlier than mid-2022 previously expected
Borrowing
  • Borrowing as a percentage of GDP is forecast to fall 7.9% of GDP this year to 3.3% in 2022 and then 2.4% in 2023
  • Debt levels are set to fall as a share of national income
Inflation
  • The Consumer Prices Index (CPI) increased by 3.1% in the 12 months to September, compared to a low of 0.4% in February 2021 – of this, energy and goods contributed 1.9% to CPI inflation in September
  • The Office for Budget Responsibility (OBR) expects inflation will remain elevated over 2022 and 2023, reflecting the lagged effects of recent increases in wholesale energy and other input prices
  • Inflation is expected to rise further to 4.4% in Q2 2022 before returning to target by the end of 2024

Employment

  • Since February 2020 wages increased in real terms by 3.4%
  • Following the end of the furlough scheme in September, the OBR expects unemployment to peak at 5.2% in Q4 2021, equivalent to around 2 million fewer people
  • The unemployment rate is forecast to fall to 4.2% in 2024 and remain there for the remainder of the forecast period
Spending
  • Spending Review 2021 (SR21) confirms that total departmental spending is set to grow in real terms at 3.8% a year on average over this Parliament – an increase of over £150 billion a year by 2024/25 – £90 billion in real terms
  • £24 billion earmarked for housing: £11.5 billion for up to 180,000 affordable homes, with brownfield sites targeted for development
  • Extra £2.2 billion for courts, prisons and probation services
  • Tax relief for museums and galleries will be extended for two years, to March 2024
  • Government scheduled to reinstate its commitment to spend 0.7% of GDP on foreign aid by 2024/25
  • Funding to rise 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
  • Grant to fund local government of £4.8 billion, the ‘largest increase in core funding for over a decade’
  • Planned rise in fuel duty will be cancelled amid the highest pump prices in eight years

Health and Social Care

  • Spending on healthcare to increase by £44 billion to over £177 billion by the end of this Parliament
  • In a pre-Budget announcement, an additional £5.9 billion will go to the NHS to tackle the backlog in care following the COVID-19 pandemic – with investment in diagnostic services, surgical hubs and boosting bed capacity
  • The health budget set to be the largest since 2010, with investment in research and development, better screening, 40 new hospitals and 70 hospital upgrades among other improvements
  • 50,000 more nurses, 50 million more primary care appointments
  • Extra revenue from the Health and Social Care Levy to go towards the NHS and social care
  •  £4.8 billion for local government over the next three years for social care
Universal Credit
  • Universal Credit taper rate cut by 8% no later than 1 December, bringing it down from 63% to 55%, worth more than £2 billion
  • Work allowance increased by £500
Housing
  • Further £1.8 billion investment to meet the government’s commitment to £10 billion investment in housing supply and unlock over 1 million new homes
  • Reconfirmation of £11.5 billion investment through the Affordable Homes Programme (2021 to 2026), of which £7.5 billion is over this period
  • £640 billion a year to help combat rough sleeping and the homeless
Children and education
  • Schools to receive an extra £4.7 billion by 2024/25
  • Nearly £2 billion of new funding to help schools and colleges to recover from the pandemic
  • Schools funding to return to 2010 levels in real terms, an equivalent per pupil cash increase of more than £1,500
  • £300 million to be spent on ‘Start for Life’ parenting programmes, with an additional £170 million by 2024/25 for childcare
  • A UK-wide numeracy programme will be set-up to help improve basic maths skills among adults
  • 30,000 new school places for children with special needs and disabilities
Levelling up
  • £1.7 billion of funding in the first grants from the Treasury’s Levelling Up Fund, for towns and cities including Stoke-on-Trent, Leeds, Doncaster and Leicester
  • Libraries to be renovated, restored and revived
  • Tax relief on museums and galleries due to be announced in March next year, extended until March 2024
Business
  • Changes to business rates reformed to support companies, including a new 12-month relief for firms to invest in their premises
  • Next year’s planned increase in the business rates multiplier cancelled, worth £4.6 billion over the next five years
  • 50% business rates discount for companies in retail, hospitality and leisure sectors, up to a maximum of £110,000, worth £1.7 billion
  • A 4% levy placed on property developers with profits over £25 million to help create a £5 billion fund for removing unsafe cladding
  • Bank surcharge cut from 8% to 3%
  • Investment incentives announced worth £750 million
Infrastructure and investment
  • Increased investment to support London-style transport across the regions of England
  • £21 billion on roads and £46 billion on railways to improve journey times between cities
  • Target for hitting research and development spending will reach £22 billion by 2026/27
  • Investment of £20 billion in R&D by 2024/25 to secure the UK’s future as a global science superpower
  • Tax relief limited for business R&D spending so that it only applies to domestic activities
Air travel
  • New ultra-long-haul band in Air Passenger Duty for flights of over 5,500 miles to be introduced from April 2023
  • Financial support for English airports extended for a further six months
  • Flights between airports in the UK nations subject to a new lower rate of Air Passenger Duty from April 2023
Alcohol
  • Most radical simplification of alcohol duties in more than 140 years will see the number of rates drop from 15 to six
  • Small brewers’ relief announced, including for cider makers
  • A planned rise in the duty on spirits, wine, cider and beer cancelled
  • Stronger red wines, fortified wines and high-strength ciders set to see a small increase in their rates
  • Rates on many lower-alcohol drinks including rosé wine, fruit ciders, liqueurs, lower-strength beers and wines reduced
  • All sparkling wines to pay the same duty as still wines of equivalent strength
  • A new, lower rate of duty on draught beer and cider to cut the rates by 5%

What does the Autumn Budget 2021 mean for you?

If you have any questions or would like to discuss your situation – please contact us.