Budget and Spending Review – October 2021: What you need to know

Addressing the House of Commons, Chancellor Rishi Sunak used the 2021 Autumn Budget to announce new fiscal rules ‘ensuring that public finances remain on a sustainable path’ during the ongoing recovery from the coronavirus (COVID-19) pandemic.

Within his Budget speech, Chancellor Rishi Sunak announced the government’s intention to create high-wage, high-skilled jobs of the future.

The Chancellor stated that the Budget and Spending Review will continue supporting people into work, with over £6 billion of funding for the Department for Work and Pensions (DWP) over the next three years to help people earn more and gain the right skills.

In addition, in its latest report, the Office for Budget Responsibility (OBR) altered its prediction for economic growth in 2021 to 6.5%.

Output in 2021 has recovered faster than the OBR had expected at the time of the last Budget in March, helping to boost tax revenues. The OBR found that strong recovery has also helped to reduce the cost of pandemic-related support.

Nominal GDP has also been revised up by 4.1% for 2025/26, relative to the figures announced in March.

The Chancellor announced that total departmental spending will grow by £150 billion per year in cash terms by 2024/25, marking the largest real term increase in overall departmental spending for any Parliament this century. Key points were:

• Public research and development (R&D) investment will increase to a record level.
• In its report prepared for the Budget, the OBR altered its prediction for economic growth in 2021.
• Significant changes to fuel duty and alcohol duties were announced.
• The government will give £11.5 billion to help build up to 180,000 affordable homes.
  
  
• Confirmation that the government will increase the National Living Wage.
  
  
• Allocation of the first round of the Levelling Up Fund.
• Changes are being made to business rates for certain sectors.

In addition, the Chancellor announced that the Scottish government will benefit from a £4.6 billion per year funding boost; the Welsh government stand to benefit from a £2.5 billion per year funding boost and the Northern Ireland Executive will receive a £1.6 billion per year funding boost.

The business reaction:

Business groups have reacted to Chancellor Rishi Sunak’s 2021 Autumn Budget speech.

Responding to the speech, the Confederation of British Industry (CBI) stated that the Chancellor ‘showed a willingness to listen to business with measures that will get firms innovating and help the economy to grow’.

However, Tony Danker, Director General of the CBI, warned: ‘This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit, post-COVID world.

Meanwhile, the Federation of Small Businesses (FSB) also voiced concerns over the Chancellor’s Budget announcements. Mike Cherry, National Chair of the FSB, said: ‘This Budget has delivered some measures that should help to arrest the current decline in small business confidence.

‘But against a backdrop of spiralling costs, supply chain disruption and labour shortages, is there enough here to deliver the government’s vision for a low-tax, high-productivity economy? Unfortunately not.’

How can we help

We here at Mercia offer our Budget Update On-demand course.

This course will bring accountancy practitioners up to date with what they need to know from the Autumn Budget. As well as covering the headlines, it will also delve into the detail and inform delegates what others are not yet speaking about. It will also confirm the rumours that didn’t come to fruition. This course will be available from the 29 October 2021.