Our Autumn Budget Summary
28TH OCTOBER 2021
Our Tax Partner, Ian Kelly, summarises yesterday’s budget speech and looks at how our area is affected.
Rishi Sunak has now delivered his third and, arguably, quietest Budget and which was his second of 2021.
It’s worth looking back at the background to his first two Budgets and which comprised a very quick debut Budget in March 2020 when his speech was very quickly eclipsed by the onset of COVID-19 and a second event last March that was designed to keep the economy going until the country emerged from lockdown.
It is interesting to look at Sunak’s delivery over the three Budgets.
He was pretty bullish in Budget One under the strapline “getting it done” but, understandably, was more than a little subdued in Budget Two as he announced extended Coronavirus assistance and a freezing of personal tax allowances and income tax rates and thresholds moving forward.
It is always easy, of course, to spend other people’s money but the feedback was that he’d done a fair job and all that could be reasonably asked of him.
I found his tone this time around under the longer banner of “A stronger economy for the British people” to be upbeat in a different way to his first Budget, perhaps giddy or excitable one could say, as he looked to steer the country into happier times.
Sunak was burdened to a degree by various shortages and supply chain issues; the dramatic increase in energy costs and petrol and the pandemic was announced to be the blame.
He was buoyed, though, by some encouraging statistics that showed that unemployment thought to peak at 12% was 5.2%; borrowing was down from 7.9% to 3.3% and a revised growth forecast up from 4% to 6.5%.
He had also had the, in advance, announcements; primarily on the increase in the National Living Wage (from £8.91 per hour to £9.50ph) from 1 April next year and extra funding for transport, education and housing plus a “rabbit from the hat” expected on Universal Credit.
How is our area affected?
The Tees Valley will receive a share of £5.7bn over five years through the City Region Sustainability Transport Settlements. Sunak failed to give any news on the future of the High Speed Rail project and which eastern leg would see journey times between the North East and London cut by 31 minutes.
£310m has been made available to the Tees Valley for upgrade schemes to Darlington and Middlesbrough railway stations and improving local rail links.
A £50,000 strategic review into the reinstating of a rail service between Darlington and Weardale.
There will be a share of £24bn spend between 2021 and 2025 to upgrade the Trans-Pennine A66.
A 50% cut in Air Passenger Duty to £6.50 will be introduced from April 2023 for internal flights in the UK and which will benefit some nine million passengers including those flying from or to Teesside International Airport.
The UK Infrastructure Bank is supporting a £107m loan to the Tees Valley Combined Authority to develop a site for the manufacturing of wind turbine blades.
Stockton-on-Tees to share in a £100m Levelling Up Fund to make local infrastructure improvements.
The Teesside Freeport will be one of the first three Freeports to begin initial operations from November.
Research and Development Tax Relief
As well as an increase in Government funding, there will be a reform to the R&D tax relief to allow expenditure on modern research methods including data and cloud computing costs and to focus more support to UK innovation. An initiative to improve R&D tax relief compliance and tackle abuse will be introduced in the autumn.
Levelling up and helping businesses
The £1m Annual Investment Allowance for qualifying capital expenditure will be extended from 31 December 2021 to 31 March 2023.
The Recovery Loan Scheme will be extended to 30 June 2022 to enable the continuance to lend to small and medium-sized businesses of up to £2m per business to aid recovery from the pandemic.
Part of over £1.6bn of the British Business Bank’s funds will provide debt and equity finance to SME’s in the North East.
Retail, leisure and hospitality businesses in the North East will be eligible for a new £1.7bn business rates relief package designed to provide support up to the next revaluation and which will lead towards more regular revaluation reviews. It is hoped that this initiative will help to see town centres and high streets evolve to meet new consumer demands.
National Living Wage and Universal Credit
There will be a 6.6% increase in the National Living Wage from £8.91per hour to £9.50ph from 1 April 2022 meaning an annualised increase of over £1,000.
The 63% taper on Universal Credit, regarded as a tax on work by reducing a claim by 63p for every £1 earned, will be reduced in the near future to 55%.
What might be perceived to be the overall reaction to Sunak’s third Budget address?
Well, the Universal Credit finale scored some points and, only a short while after effectively increasing taxes in the form of the NHS and health care levy, there was word that before the end of this parliament there would be some form of tax easing.
With better than expected figures, Sunak was able to action some giveaways but the pressure will be on to ease the tax burden on hard pressed families who face tougher times in the short term until that time is upon him.
If you would like a no obligation consultation to review your situation in light of the budget, please don’t hesitate to call us on 01642 606003.