Sunak pledges ‘new economy’ in Budget
RISHI Sunak promised to address the rising cost of living as he reaped the benefits of a stronger-than-expected recovery from the economic hit of Covid-19.
The Chancellor pledged a major increase in public spending, tax cuts for businesses, and investment to create a “new economy” based on high skills and wages following the pandemic.
After widespread condemnation of the decision to cut £20 a week from Universal Credit, Mr Sunak set out plans to reform the benefit to enable claimants to earn more without losing as much of it – a measure he claimed amounts to a £2billion tax cut for the lowest paid.
But Labour hit out at the package of measures announced by the Chancellor, which will cut the price of a bottle of Champagne and slash taxes for banks.
Mr Sunak acknowledged that the tax burden will reach its highest level as a share of gross domestic product (GDP) – a measure of the size of the economy – “since the early 1950s” but insisted “I don’t like it” and stressed there have to be limits to the scope of the state.
But he committed to total departmental spending growing by £150bn a year in cash terms by 2024-25.
“That’s the largest increase this century, with spending growing by 3.8% a year in real terms,” he said. It will mean a real-terms rise in spending in every single government department, he told MPs.
Mr Sunak committed to reverse the controversial cut in the aid budget, although it will not return to its legally-mandated target of 0.7% of national income until 2024/25.
Local government will get £4.8bn in grant funding over three years, the largest increase for more than a decade, he said.
He also promised that the devolved administrations will be given the “largest block grants” since 1998, with an increase to Scottish Government funding in each year by an average of £4.6bn, £2.5bn for the Welsh Government, and £1.6bn for the Northern Ireland Executive.
The Chancellor said: “Employment is up. Investment is growing. Public services are improving. The public finances are stabilising. And wages are rising.
“Today’s Budget delivers a stronger economy for the British people: stronger growth, with the UK recovering faster than our major competitors.”
As well as previously-announced increases in minimum wage rates, Mr Sunak promised changes by December 1 to the amount of extra earnings Universal Credit claimants can keep. The move follows a widely-condemned £20-a-week cut in the benefit earlier in October.
Mr Sunak dramatically reduced the UC “taper”, meaning that, instead of losing 63p of UC for every £1 earned above the work allowance, the amount will be reduced to 55p.
The amount people can earn before starting to lose the benefit will also increase by £500.
The Chancellor announced £7bn in business rate cuts, with the cancellation of next year’s planned increases and a 50% discount on business rates for a year for a series of retail and hospitality venues.
Mr Sunak promised a new, lower rate of air passenger duty on domestic flights within the UK, benefiting nine million passengers and helping regional airports.
He also announced a series of reforms to alcohol taxes from February 2023 – including a 5% cut in duty on draught products to help support pubs.