The Chancellor of the Exchequer is the person appointed to be in charge of the government’s finances. Every year they unveil the annual budget detailing how much of the nation’s money the government will take in taxes and what they will spend it on. Chancellor Rishi Sunak presented the budget in the House of Commons on Wednesday 27th October 2021. Budgets are usually set once a year; however, this autumn season marks the second time a budget has been declared in 2021.
As Chancellor, Sunak has been prominent in the government’s economic response to the recession caused by the global Covid-19 pandemic. The budget includes forecasts for the economy by the Office for Budget Responsibility. For example, unemployment is forecast to peak at 5.2% in the last months of 2021 – which is 6.7% less than the 11.9% predicted – due to the much-needed extension of the furlough scheme. The furlough scheme ensured jobs were protected as businesses got back on their feet so employees could eventually go back to work. Job creation and retention have been positive for the economic fight against covid.
Many key points in the budget contribute to building an economy post-pandemic.
Sunak announced that England’s city regions will receive £6.9bn to spend on upgrading public transport and introducing London-style improvements in infrastructure, fares and services: £1.07 billion will be allocated to Greater Manchester, £1.05 billion to the West Midlands and £830m to West Yorkshire. Modernising local transport networks will make it more accessible to people who live and work in these cities. This will ensure more people will have better access to jobs and education.
As part of Prime Minister Boris Johnson’s pledge to ‘level up’ the UK and tackle regional inequality, £1.7bn of funding will be allocated to areas that have ‘fallen behind. Libraries will be ‘‘renovated, restored and revived’’. The Levelling-Up scheme is especially taking place in northern regions that voted for Brexit and backed the Conservative party in the 2019 general election. Most notable areas include towns and cities like Stoke-on-Trent, Leeds, Doncaster and Leicester. Johnson is not trying to hide that he is looking to retain seats in the Midlands and north at the next election. Sunak has chosen investment over retrenchment which is unusual for a Conservative government. This response could be largely due to the state of economic difficulty the UK is trying to recover from. Spending more now on enhancements and making the nation happy and motivated is likely to have some beneficial pay-offs in the future.
The national living wage is set to increase to £9.50 per hour from 1 April 2022. It will rise by 6.6% from the current living wage of £8.91 per hour for those aged 23 and over. The government says this will give full-time workers an extra £1,000 a year. Younger workers are also set to see an increase in their national minimum wages. The Chancellor said ‘’This is a government that is on the side of working people. This wage boost ensures we’re making work pay’’. Although, there is criticism that the rise is not enough as much of it will be consumed by the government’s increases to income tax and national insurance, universal credit cuts and soaring household energy bills. Also, with inflation expected to jump from 3.1% to 4% next year the rise may almost be regarded as ineffective because household incomes aren’t set to recover before 2023.
Some positive moves were made to support businesses in the budget. Sunak announced that firms in the hospitality, leisure and retail sectors will receive a 50% business rates discount in 2022-23, to a maximum of £110k. It is a cut worth £1.7bn. For the arts and culture sector, tax relief for museums and galleries is to be extended until 2024. Moreover, the continuing freeze in fuel duty at 57.95 pence per litre for 2022/2023 will help businesses as petrol prices rise. The Chancellor has provided significant aid to firms most damaged by Covid-19; nevertheless, many feel the measures do little to effectively help businesses survive long-term.
Other announcements in the budget include: funding for each pupil to be returned to 2010 levels in an increase worth £1,500 a pupil, £6bn of funding to be given to the NHS to tackle backlogs and lower-strength alcoholic drinks to receive a lower tax rate than currently; whilst, higher-strength alcoholic drinks are to receive higher duties.
Written by Chanel Enow
Research compiled by Ibrahim Ahmed