Rishi Sunak will deliver his Budget and Spending Review to the Commons next week, setting out the government’s spending and financial strategy. He is expected to unveil a number of measures to balance the books after spending billions during the Covid pandemic.
What announcements can we expect?
The Chancellor is expected to make a swathe of announcements in next week’s Budget, from new climate measures to tax changes and new rules on student loan repayments.
Minimum wage
In his March Budget, Mr Sunak announced the minimum wage would increase to £8.91 in April for over 23s.
The age threshold was lowered from 25 and over to 23 and over.
Under the new rules, those aged between 21 to 22 now receive £8.36 and workers aged between 18 to 20 get £6.56 – up from £6.45.
Under 18s get £4.62 – a rise from £4.55 – and apprentices receive £4.30, up from £4.15.
Fresh changes to the national minimum wage could be announced next week, as the Government has come under pressure to help employees – especially as younger workers have been some of the worst hit by the economic downturn.
In his keynote speech to delegates at the Conservative Party Conference earlier this month, Boris Johnson said his goal is to move “towards a high wage, high skill, high productivity economy that the people of this country need and deserve,” in a hint the minimum wage is set to rise.
Campaigning group Youth Fight for Jobs have called for an immediate increase to £12-an-hour, while Labour passed a motion at its party conference last month to raise the minimum wage to £15-an-hour.
Reports have indicated Mr Sunak could increase the minimum wage from £9.42 per hour, which would represent an increase of more than five per cent from its current rate of £8.91 an hour, the third-highest annual rise since the financial crash.
When probed on it by Sky News earlier this month, Mr Johnson said: “You should wait and see what Rishi does, we will do everything we can to look after people in the months ahead.”
Pay Freeze
The Chancellor is widely expected to end a one-year freeze on public-sector pay, introduced in order to control the deficit at a time when the economy was shrinking thanks to the impact of the virus and lockdowns.
The pay freeze affected over 1.3million workers, including civil servants, teachers, police, firefighters, the armed forces and council staff.
Front-line NHS staff were exempt from the pay freeze and received a three per cent pay rise backdated to April 2021.
Tax changes
Taxes are highly unlikely to be cut in the Budget, due to the Government borrowing £299bn, the highest figure since records began in 1946, in the first year of the pandemic – April 2020 to April 2021.
Speaking at Conservative Party conference on Monday 4 October, the Chancellor said he wanted to cut taxes, but that it may take some time before he is able to.
The Treasury has already frozen income tax thresholds and announced a 1.25 per cent National Insurance increase to fund a health and social care levy, breaking Tory manifesto promises not to raise taxes.
Corporation tax will also rise from 19 per cent to 25 per cent from April 2023, but Mr Sunak will be under pressure to do more to put the economy on a more sustainable footing.
He is expected to hike capital gains tax, which the Chancellor already froze until 2026 in the last Budget, with talk of rates being aligned more closely with income tax rates.
Inheritance tax rates are not expected to change.
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Climate Change
The Treasury has yet to publish its review into plans for next zero emissions by 2050, which was due to be released in spring 2021.
Mr Sunak has come under pressure to share the review and outline plans to help the UK transition to a zero-carbon economy.
The UK will host the UN COP26 climate change summit in Glasgow later this month and the pressure is on the Government to show leadership.
The UK has targets to cut CO2 emissions by 78 per cent by 2035 and reach net zero by 2050.
Mr Sunak is also expected to announce the Heating and Boiler strategy, which will be aimed at making electricity cheaper and gas more expensive over the course of the next 15 years.
The Government will ban the installation of new gas boilers after 2035, with consumers being handed subsidies of between £4,000 and £7,000 for electric heat pumps.
Surcharges will also be padded on polluting gas rather than electricity, which will push up gas bills by £159.
It is not yet clear how much help Britons will get with retrofitting, which could cost as much as £12,000.
Mr Sunak is also tipped to make the Government’s electric car grants less generous, in order to save money.
The Chancellor is said to be pushing to reduce the value of the current ‘plug-in’ grant which is worth up to £2,500.
Student Loans
The Chancellor may lower the threshold at which people start repaying their student loans, which could save the Treasury about £2bn a year.
Currently English and Welsh students who enrolled at university after 2012 pay nine per cent of everything they earn above £27,295 per year.
They repay the same nine per cent until the loan is fully repaid or until 30 years after graduating.
But ministers have proposed cutting the threshold to as low as £23,000, and graduates would have 40 years as opposed to 30, to repay their debt.
Critics have said it would cause a drastic change to graduates incomes, with Money Saving Expert Martin Lewis warning the lowest earning graduates would end up paying more, and for longer.
He said students would end up paying about £400 more a year.
Funding pledges
Mr Sunak wants to keep Government borrowing to a minimum, as the UK government deficit (or net borrowing) rose to £304bn in the financial year ending March 2021, the equivalent to 14.5 per cent of GDP.
But the Chancellor will likely have come under pressure from the Prime Minister to fund recent new pledges, such as Mr Johnson’s ambition to “level-up”.
Mr Johnson may also publish the “levelling up” White Paper which explains how the Government’s flagship policy will be implemented and sets specific metrics against which it can be judged by the public and experts.
This is likely to come with a large price tag that has to be met by the Treasury, for example Northern Powerhouse Rail alone is projected to cost a minimum of £30bn.
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