Last week, Chancellor of the Exchequer, Rishi Sunak, said that today’s mini budget announcement would be about, “looking to the future and building a stronger economy for the British people.” This comes during the tumultuous aftermath of the “one in 300-year economic shock” of the coronavirus pandemic.
The Chancellor said that his latest announcement would prioritise public services and drive economic growth by investing in infrastructure, innovation and skills.
Sunak also briefly touched on the most recent inflation number of 3%, which is higher than the normal target rate. He put this spike in inflation down to two things: the rapid re-opening of economies after Covid-18, which has put a huge amount of pressure on global supply chains, and the current rates of energy prices – both of which are out of his control. In his mini budget speech today, Sunak also said that the rate of inflation is likely to rise further.
So, with the predictions of this latest announcement finally confirmed, we’ve taken a look into exactly what the budget means for you and your money.
Mini budget highlights
As is typical of politicians from either side of the aisle, much of Sunak’s more than hour-long budget speech tried to portray the strengths and successes of the current government. But he did provide independent statistics which reflect the country’s growth out of the turbulent pandemic economy, and cited an “economy fit for a new state of optimism”.
Amongst the highlights of note are as follows:
- The Office for Budget Responsibility (OBR) said that they expect the economy to grow by up to 6.5% in 2022
- At the height of the pandemic, unemployment was expected to peak at 12%. The actual peak is now expected at 5.2%
- Wages are rising, and have grown in real terms by 3.5%
- There will be a real terms rise in spending for all government departments, including:
- £11.5bn for affordable new homes
- £4.7bn by 2024/5 for schools
- £1.7bn of levelling up funding allocated for 100 areas across the UK
- £5.7bn for transport schemes in England
- £22.2bn R&D investment by 2026/7 – now focused on UK activity
What is the Budget?
The Budget is an annual statement made by the Chancellor of the Exchequer, typically in March. It delivers a report to the House of Commons (HoC) outlining the state of the economy and the government’s proposals for changes to taxation.
Thanks to the many televised conferences and media frenzy that ensued from the coronavirus pandemic, Chancellor of the Exchequer Rishi Sunak is quite possibly one of the most memorable Chancellors in recent history.
In his own words during an interview last week, Sunak stated that “the challenges I’ve had to deal with in the last 12 to 18 months have been ones that of course, I wish I didn’t have to deal with, but that’s the reality of the situation.”
What was announced – and how could it affect me?
In terms of how the announcements from today’s mini-budget could directly affect you, there are some important things to highlight:
Alcohol duty decreased
Sunak spent a remarkable amount of time talking about the decrease in alcohol duty, a tax that will undergo a “radical simplification” now that the UK has left the EU. This includes taxing alcohol in terms of strength – the stronger the alcohol, the more duty there will be to pay. Sparkling wines will pay a lower duty, down to the same as still wines of the equivalent volume, and pubs will get a draft relief, with the aim of “benefitting community pubs”. This means around 3p per pint less duty, which is the biggest cut to beer duty for 50 years.
The planned fuel duty increase is cancelled
In a bid to support working families at a time when fuel prices are at their highest level in eight years, the government’s planned rise in fuel duty is being cancelled. That means the average tank of fuel will be £15 less per car, and the average car driver will save a total of around £1,900.
Public sector worker pay freeze to end
Salaries for the public sector, including nurses, teachers and social workers, had their pay frozen in November last year. Today’s announcement ends this freeze, returning workers to the normal, independent pay-setting service.
Air passenger duty
UK domestic flights will be subject to a lower air passenger duty rate from April 2023, meaning that approximately nine million passengers each year will have duty cut by half. There will be extra passenger duty to pay on long haul flights over 5,500 miles.
Increase to the National Living Wage
The National Living Wage will increase next year by 6.6% to £9.50 per hour. Worth around £1,000 per year, this increase will benefit around two million people across the UK.
An 8% cut to the Universal Credit taper
In another win for low-income households, the Universal Credit taper (which kicks in when you start working more hours) will be cut from 63% to 55%. This means that around two million families will take home on average £1,000 more per year. This cut will start within weeks, and no later than 1st December 2021. As an example of what this looks like, a single mother of two in rented accommodation and working full time will be better off by £1,200 per year.
Open a savings account with Raisin UK
While the economic future of the UK is still not quite out of the woods, there is one thing that remains true – it is always a good time to save. With many people having saved money during the national restrictions of the pandemic and minimum wage increasing across the board, now is the perfect time to safely stow your cash and earn interest on your savings.
To get a competitive rate of interest on your money, the most popular accounts to consider include:
Fixed rate bonds
A fixed rate bond offers competitive fixed interest rates and could be ideal for you if you already have a lump sum set aside that you won’t need access to. As the interest rate you’ll earn won’t change, you’ll know exactly how much you’ll get at the end of your fixed term, which can be six months, as well as one, two, three and five years.
If you don’t want to restrict your access to your money, or you simply want the flexibility to withdraw your money at a date of your choosing, opening a notice account might be a better choice. A notice account offers competitive variable interest rates and gives you the freedom to withdraw your money after a set notice period, typically between 30 and 90 days.
Easy access savings accounts
Easy access savings accounts offer a good deal of flexibility, and give you the freedom to top-up and withdraw money at your convenience.