Already much is known about the Chancellor of the Exchequer’s Autumn Budget and spending review, with Rishi Sunak and his colleagues publicly announcing and leaking new details every day for weeks.
So far his Treasury department has committed to almost GBP26bn of spending, according to newspaper calculations.
One of the latest announcements is that the minimum wage is set to be increased to GBP9.50 per hour from GBP8.91, after advice from the Low Pay Commission.
Sunak will hike the National Living Wage 6.6% as one of hits top Budget announcements, meaning a 35-hour-a-week worker will receive an extra GBP1,074 a year before tax.
Corporate costs will be increased by the change and some business may decide to pass this on to consumers via increased prices.
In recent weeks the government other pre-announced items have included almost GBP7bn to be allocated for “levelling up” urban transport, though the Chancellor admitted to Sky News that GBP5.5bn of this funding has been previously announced, so the GBP7bn announcement is really a GBP1.5bn top-up.
A new GBP1.4bn fund will be launched to attract overseas investment into the UK life sciences companies and electric vehicle producers and component makers.
Another fund, the UK ‘Shared Prosperity Fund’ will get GBP1.5bn a year – though this is to replace the loss of the GBP1.8bn-a-year EU structural funds post Brexit.fbudget
There will be close to GBP6bn announced for NHS capital funding, of which GBP2.3bn will be for diagnostic services, GBP1.5bn for increasing hospital bed capacity and GBP2.1bn for technology and data security and efficiency.
Another GBP700mln has been pledged for Home Secretary Priti Patel’s post-Brexit borders and immigration system, as well as a new maritime patrol fleet, plus another GBP435mln for the Home Office for tackling violence and crime, including a victims services, crime prevention and for the Crown Prosecution Service.
Adult education is another theme, with GBP560mln for adult maths coaching to help increase numeracy skills, along with GBP5bn for health research and innovation and GBP3bn for job training.
Sunak has also confirmed there will be a six-month extension to the COVID recovery loan scheme, to June 2022, while there should also be a cut to the UK bank corporation tax surcharge confirmed from 8% to 3% from April 2023.
For households, after ending the furlough and the universal credit schemes, Sunak is being pressed to increase benefits, with some suggestions of a cut to the 5% rate of VAT on household energy bills, and GBP500mln to pay for a network of “family hubs” to provide support for new parents.
If he’s feeling generous to business, the Chancellor could extend a number of the tax breaks that are due to come to an end this month, including the freeze on alcohol duty and lower VAT rates for hospitality and tourism businesses.
As for online businesses, will there be more detail on the digital sales tax or Amazon tax?
Outside of this, economists and analysts in the City are not seeing room for much else.
Having surprised to the upside in March, the Chancellor is likely to return to fiscal orthodoxy, said analysts at Citigroup, with the fiscal framework set out in the 2019 election to be re-affirmed and further support limited to levelling up, skills investment and temporary catch-up support.
“Even with relatively conservative fiscal rules, this will likely leave some fiscal space unexploited. We expect tightness today to prove a harbinger of further fiscal easing in FY 2023/4 ahead of the next scheduled general election. But near-term fiscal tightness could be a notable headwind for the Bank of England with fiscal policy likely to prove somewhat pro-cyclical in the years ahead,” Citi said.
Alongside the Budget, the Treasury’s three-year spending review for government departments will reportedly include a wide-ranging clampdown on spending.
The Office for Budget Responsibility said in March that Sunak’s spring Budget made no provision for virus-related spending costs beyond the end of this fiscal year.
“That means the Chancellor will surely have to address the longer term legacy the pandemic will leave behind, such as the ongoing costs of test and trace and booster programmes, dealing with the NHS treatment backlog, repairing the black hole in rail fare revenues, and making up for lost teaching hours,” said Laith Khalaf, head of investment analysis at AJ Bell.
“Against a backdrop of record levels of debt, these additional cost pressures look like they will weigh heavily on the purse strings of the Exchequer.”