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Chancellor Rishi Sunak increased total departmental spending by £150bn ($205bn) in the Autumn Budget, the largest rise in the last century, with spending growing by 3.8% a year in real terms.
It has now put Britain on course for its biggest tax burden since the 50s, despite a goal to cut taxes by the end of the Parliament.
"Taking his March and October Budgets together, the chancellor has raised taxes by more this year than in any single year since Norman Lamont and Ken Clarke’s two 1993 Budgets in the aftermath of Black Wednesday,” The Office for Budget Responsibility (OBR) said on Wednesday.
Sunak said the boost would see every government department’s budget increase, so with so much spending on the cards, let’s take a quick look at the key takeaways from the Budget:
Inflation is set to average 4% over the next year, according to forecasts from the Office for Budget Responsibility. This is thanks to pressures on energy prices and global supply chains.
As inflationary pressures continue to affect the British economy, Sunak unveiled new funding to improve lorry park facilities to ease the disruptions.
He also suspended the HGV levy a further year until 2023, as well as already announcing freezing vehicle excise duty for HGVs.
Watch: What are the key takeaways from Rishi's budget?
The OBR revised up its forecasts for UK economic growth, expecting gross domestic product (GDP) to expand by 6.5% this year compared to the 4% it forecast at the Budget in March.
“It will be especially scary for pensioners trying to cover essentials from their limited income and anyone trying to make their pension pot last in retirement,” Becky O’Connor, head of pensions and savings at Interactive Investor, said.
“Inflation at a level of 4% becomes hard to beat even when investing in the stock market, so long term investors will have to box clever to beat it. Some may feel they are being pushed out of their risk comfort zone in order to do so.
Sunak revealed that businesses in the hospitality, retail and leisure sectors will be given a 50% discount on business rates for one year. The move is the biggest single-year cut to business rates in 30 years, outside of emergency COVID-19 reliefs.
Eligible properties will receive up to 50% off their bill, subject to a £110,000 cash cap per business — more than double the relief that was announced pre-COVID-19 for the 2020-21 financial year.
We’re taking steps to ease the burden of business rates and boost our high streets," he said, adding that from 2023, every business will be able to make property improvements and pay no extra rates for 12 months.
The tax cuts will see business rates slashed by £7bn.
Sunak announced a 5% cut to duty on draught beer and cider, as part of the “most radical” reforms to alcohol duty in a century.
In a move to support pubs to help them bounce back from the coronavirus pandemic, he said that the measure was a “long-term investment” in UK pubs, amounting to £100m a year and a permanent cut in the cost of a pint by 3p.
Sunak said there would now be just six duty rates on alcohol, down from 15, with the system based on the alcohol content — the stronger the drink, the higher the rate.
This means that some stronger spirits and wines will become more expensive, however, weaker alcohols like beer and rosé will become cheaper.
“The sector is facing a combination of challenges, including rising food and energy costs, and National Living Wage and employers’ NI contribution increases from next April,” Chris Sanger, EY’s head of tax policy, said.
“However, the duty changes may not be enough to prevent rising prices at bars and tills as companies in the sector try to cover the cost of all their input prices.”
As was previously reported, national insurance is set to rise by 1.25 percentage points in April, to 13.25% on earnings between £9,564 and £50,268, and 3.25% on earnings above this.
Meanwhile, dividend tax will rise by the same amount to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.
A residential property developers’ tax, at 4% of profits over £25m, is also set to help pay for the removal of unsafe cladding on the highest risk buildings, the finance minister said, which will ease the pressure on those living in blighted properties.
Watch: Key points from the chancellor's Budget
Not announced, but buried in the Budget documents, was news that council tax looks set to rise, with councils able to raise taxes by 2% without a referendum, plus another 1% for social care. Police and crime commissioners will also have the power to increase the money they raise through council tax.
“These hikes will add insult to injury for taxpayers who are already feeling the pressure from rising prices on all sides,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.
Sunak has faced pressure in recent weeks to reverse his decision on universal credit after scrapping the £20-a-week uplift earlier this month.
The Universal Credit taper currently, which is currently 63%, withdraws cash from people on lower incomes faster than the effective tax rate of people earning over £100,000.
However he announced an 8% tax cut on this, dropping to 55%. The move will be worth more than £2bn per year, introduced within weeks and no later than 1 December.
Although it will benefit those who are able to work more, by offsetting the impact of the withdrawal, it will only boost the incomes of 2 million people, so millions more will remain worse off.
The chancellor stressed that it was the "birthright of every child in an independent and prosperous United Kingdom" to succeed”, announcing a £4.8bn Levelling Up Fund.
It has identified the first 105 places to receive funding for local transport, cultural assets and regeneration, as well as the £2.6bn UK Shared Prosperity Fund, to support people in accessing new opportunities across the UK.
The government will also be investing tens of billions on roads and railways, and is guaranteeing £5.7bn in spending for London-style transport systems across city regions, as well as spending on cycling infrastructure, community football pitches, youth clubs, regional theatres and museums.
Stephen Church, EY’s North West managing partner and north markets leader said the funding was crucial to “tackle entrenched regional inequalities and close the skills gap.”