Chancellor to lay out plans in October Budget and Spending Review
The Chancellor of the Exchequer, Rishi Sunak, is expected to announce that the Government will be pumping extra billions into the economy when he sets out details of the Budget and Spending Review on October 27.
The review will give details of the next three years of spending priorities while the Budget is expected to provide details of how the country balances its books after the huge outlays during the pandemic.
Capital budgets for 2022-23 and 2024-2045 and resources for Government departments will be laid out, as will grants for the devolved administrations in the UK.
The Chancellor says that by 2024-25, core departmental spending will be £140 billion more per year in cash terms than at the start of the Parliament.
In total, day-to-day spending will increase to £440 billion by 2024-25, increasing by nearly £100 billion a year in cash terms over the Parliament.
To help pay for it, Government departments have been asked to identify savings and efficiencies of at least five per cent from their day-to-day budget to invest in prioritised areas.
On the Spending Review, the Government says it will set out how it will:
- Ensure strong and innovative public services by investing in the NHS, education, the criminal justice system and housing
- Level up across the UK to increase and spread opportunity; unleash the potential of places by improving outcomes UK-wide
- Lead the transition to Net Zero across the country and more globally
- Advance Global Britain and seizing the opportunities of EU exit
- Deliver plans for an infrastructure and innovation revolution and cementing the UK as a scientific superpower, working in close partnership with the private sector.
The Spending Review and Budget will be carefully intertwined and may suggest future tax rises on the horizon, despite previous pledges.
This follows the announcement of the increase in National Insurance to cover health and social care and means core departmental spending will grow in real terms at nearly four per cent per year on average over this Parliament.
The Chancellor seems limited on other tax raising methods. However, with inflation on the rise which may lead to an increase in interest rates, the Chancellor is likely to be concerned about the cost of servicing the nation’s huge pandemic debt.
As a result, he has already temporarily suspended the triple lock on pensions, which faced a substantial rise of eight per cent due to earnings increasing, which was an anomaly due to furlough. Stealth wealth taxes could be an option, including Inheritance Tax (IHT) being suggested as a possible target.
IHT revenue has been rising substantially, driven by big increases in house prices, so the Chancellor could look at ways of maximising revenue through restricting reliefs and exemptions without altering headline tax rates.
There are also ongoing rumours of a possible link to Capital Gains Tax, which could see people taxed more on the assets they dispose of, particularly investment property, which has been in the Government’s sights for some time.
Pension allowances could also be an area where revenue could be raised by lowering the £40,000 annual allowance together with freezing other allowances and thresholds.
Mr Sunak said: “Since the start of the pandemic, we’ve delivered on an unprecedented scale to protect people’s jobs and livelihoods.
“Despite the worst economic recession in 300 years, we have not only got people back into work through the Plan for Jobs but continued to deliver on the priorities of the British people.”
The Office for Budget Responsibility (OBR) will also prepare an economic and fiscal forecast, which will be presented alongside the Budget and Spending Review.
On the day of the announcement we will prepare a summary of the announcement, followed by more details of the changes announced in the days after. Keep an eye on our website for updates.