Five takeaways from the Autumn Budget 2021

Yesterday’s Budget outlined the foundation to prepare for a “new age of optimism”. And while the Chancellor warned of challenging months ahead, he set out his vision for a post-pandemic Britain, pledging to begin the work towards a stronger economy.

1. Inflation is rising – soften the blow by utilising higher rates

The Chancellor revealed the inflation forecast, announcing a sharp surge from the OBR’s last forecast of 3.1% in September, to an average of 4% over the course of 2022.

Sunak signalled his support for an interest rate increase by reminding the Bank of England of their commitment to keep inflation low.

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2. Promises for significant capital investment

In a bid to get “growth up, jobs up, and debt down”, plans for a large spending increase in infrastructure and research and development (R&D) were unveiled, representing the fastest ever cash increase in R&D spending at 50%.

This marks the first round of bids from the Levelling Up Fund with £1.7bn invested in the infrastructure of over 100 local areas, including Aberdeen and Sunderland.

Also announced were plans to expand the scope of R&D reliefs to include cloud computing and data costs. This change in the rules speaks to Sunak’s plans to raise productivity and skills for a modern world.

3. New four fiscal rules introduced

To “keep this government on the path of discipline and responsibility” – or in other words – to keep a lid on debt and borrowing, four new fiscal judgements were outlined:

• Meet fiscal rules with a margin to protect against economic risks.
• Continue to support working families.
• Meet the obligations of the world’s poorest people, reinstating a spend of 0.7% of national income on overseas aid by 2024-25.
• Increase total departmental spending by £150bn (3.8%) on average per year this Parliament.

4. Rebuilding the hardest hit industries post-COVID

It’s no secret that some industries were hit harder than others over the past year. To support beloved pubs, music venues, cinemas, and restaurants, the Chancellor announced a 50% discount on business rates for the retail, hospitality, and leisure sectors.

This is the biggest single-year tax cut to business rates in over 30 years, equating to a total of £7bn.

5. Challenger banks are given a helping-hand with annual allowance boost

The Chancellor confirmed a reduction in the surcharge on banks from 8% to 3%.

Stating they are “improving banking competition, which is good for the sector and good for consumers”, Sunak also offered a break for small challenger banks by raising the annual allowance from £25m to £100m. This means they escape the surcharge until they pass the allowance in profits.