The Chancellor has unveiled the latest budget, set against the backdrop of rising employment, increasing wages and falling debt. In setting out plans for the year ahead, he noted the ongoing impact of Covid-19 and gave support to those sectors most affected by the pandemic, as well as focusing on the levelling up agenda and supporting growth in innovation. The main points to note from his Budget speech are summarised below:

  • Inflation was 3.1% in September and the OBR expects it to average 4% next year. This would be double the Bank of England’s target rate of 2% and is down to increased demand for goods as a result of the economy opening up following the pandemic, as well as the ongoing issues with global demand for energy which is causes prices to soar.
  • The OBR is forecasting that the UK economy will return to pre-Covid levels by the end of the year, which is around six months earlier than originally forecast in March 2021. It expects growth of 6.5% in 2021 and then 6% in 2022, while peak unemployment is expected to be 5.2%.
  • £24billon will be invested in housing, which includes £11.5billion to deliver up to 180,000 affordable homes and £1.8billion to convert brownfield land for homes.
  • The first round of projects being supported by the Levelling Up Fund were announced, worth £1.7billion. Locations set to benefit include Ashton-under-Lyne, Stoke-on-Trent and Leicester.
  • In an attempt to address the UK’s uneven economic geography, the Chancellor referred to “an infrastructure revolution”, which will see investment in road and rail. The investment includes almost £7billion to level up transport in cities across England, although much of this has already been announced previously by the Treasury and does not actually represent new money. Great Manchester will receive just over £1billion to fund new Metrolink trams and bus corridors, while the West Midlands will receive a similar amount for metro stations and bus schemes. Other beneficiaries are the Combined Authorities of West Yorkshire (£830million), Liverpool city Region (£710million) South Yorkshire (£570million), the West of England (£540million) and Tees Valley (£310million).
  • R&D investment will reach £22billion by 2026/27 as the government tries to boost UK innovation, although this represents a delay to the original target of 2024.
  • £30billion will be invested to create green industries of the future, as the government aims to achieve its net zero strategy.
  • Total spending on skills will increase by £3.8billion by 2024/25, while apprenticeships funding will increase to £2.7billion by the same date. In addition to these funding announcements, £560million will be invested in a UK-wide adult numeracy programme called Multiply and this could benefits regions such as the North East, West Midlands and Yorkshire & the Humber which have relatively high rates of poor numeracy.
  • The Chancellor stated that the government has completed its review of the business rates system and the following announcements stemmed from this, which amount to around £7 billion of savings over the next five years:
    • The planned increased in the business rates multiplier in 2022/23 has been frozen.
    • The retail, hospitality and leisure sectors will receive a 12-month business rates discount of 50% up to £110,000 in 2022/23.
    • Business improvements relief will be introduced for property improvements from 2023/24.
    • Revaluations in business rates will be every three years from 2023.
    • Business rates exemptions will be introduced for eligible green technologies from 2023/24.
  • The planned rise in fuel duty has been cancelled.
  • From 1 April 2022 the National Living Wage will increase to £9.50 per hour.
  • Public sector workers will see pay rises over the next three years.

Richard CookRichard Cook - Pegasus Group Director (Economics), our Director in Economics, said: “The news around the UK economy returning to pre-Covid levels faster than expected is positive news, although rising inflation means households and businesses will continue to face issues with rising costs over the next 12-months and beyond.

“It was good to see the £7billion funding confirmed for transport investment in the Combined Authorities as the government moves forward with its levelling up agenda, although only around £1.5billion represents new money and the remainder had already been announced before the Budget. The business rates discount of 50% for those sectors most affected by the pandemic will be a welcome relief for many companies and the fact that more than £20billion will be invested in housing shows how important building news homes remains.

“The economy is still facing a number of a serious issues, especially in relation to the rising cost of living, however the better than expected economic performance means there is now more cause for optimism than there was this time last year.”

Guy LongleyGuy Longley, Executive Director, said: “The additional funding to support brownfield release is welcomed and will support the regeneration of urban areas. To tackle the housing crisis there will continue to be the need to release of mix of brownfield and greenfield sites for housing if the Government’s aim to significantly boost housing supply is to be achieved.

“Funding for the digital transformation of the planning system to enable local authorities to improve their systems and allow easier access is important.  The ability to access online planning information varies greatly across local authorities and improved access to information is important.  However, a key issue for local authorities remains staffing and skill shortages that also need to be addressed to ensure the efficient and timely handling of planning applications.”

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