Chancellor Rishi Sunak will deliver his second Budget of the year at 12.30pm on Wednesday.
He’ll try to prop up Boris Johnson ’s ‘levelling up’ claims with money for transport, childcare and the NHS.
But anything he announces could be overtaken by grim rises in inflation plunging Britain into another winter of discontent.
The energy bills price cap has already jumped by £139 on October 1 and it’s set to rise again in April.
Meanwhile furlough and the evictions ban have ended, Universal Credit ’s been cut by £20 a week, and there are supply shortages in the shops.
On top of the all that, the Tory Chancellor is set to unveil a three-year Spending Review that could put the squeeze on public services even further.
So how will it all affect the country, and you and your wallet? Here are all the Budget confirmed policies, predictions and rumours so far.
Things we know will be in the Budget
Grim news on the economy and inflation
The Budget could lay out the full grim extent of the cost of living crisis to come this winter.
Mr Sunak will read out GDP growth and borrowing figures which could vary from earlier in the Covid pandemic.
But the most important figure will be inflation – which is predicted by Budget watchdog the Office for Budget Responsibility (OBR).
Only in March it predicted inflation would be 1.5% this year – it’s double that, and could rise even further. That will have a massive impact on families.
Inflation hikes the cost of your weekly shop and could turn into a spike in mortgage costs, if the Bank of England raises the base rate later this year.
They could also wipe out any increases in government spending or public sector wages.
There is also a row over claims the Chancellor will use out-of-date data to polish up his claims about the economy in time for a 2023/4 election.
Spending review squeeze
Alongside the normal Budget will be a three-year ‘spending review’, setting out departments’ budgets right up to Spring 2025.
And while it won’t be a vehicle for the brutal austerity of George Osborne, there will likely be cuts hiding in plain sight.
It’s no longer as fashionable for Tories to shout about making cuts, but after Covid spending they need to come from somewhere.
That means we could see vague or unspecific lines about efficiency savings that have a huge impact on public services down the line.
In the March Budget, the Institute for Fiscal Studies (IFS) think tank identified a £4bn black hole that would make the Spending Review “particularly tough” for unprotected areas of government.
While these don’t include the NHS they do include the Home Office, Ministry of Justice, and local government which funds social care.
“There’s going to be something that feels a bit like austerity for at least some public services if we are going to keep to these spending plans,” said the IFS.
£12bn National Insurance raid
POOL/AFP via Getty Images)
We already know Brits who earn over £9,568 a year will see their National Insurance Contributions rise from 12% to 13.25% from April 2022.
The £12bn-a-year measure will cost £180 a year for a worker on £24,100; £255 for a worker on £30,000; and £715 for a worker on £67,100. Firms will have to contribute too.
From April 2023, this 1.25-point rise will be named the ’Health and Social Care Levy’ and appear separately on Brits’ payslips. From this point it will also apply to workers who are above pension age – which NICs do not.
From October 2023, the money will be partly used to fund a new £86,000 cap on the amount people must pay for care over their lifetimes – and a new-style £20,000 floor, which saves people from paying for their care once assets fall below a certain level.
But just £5.4bn of £36bn raised in the first three years (2022/23-2024/25) will go on social care.
Of the £5.4bn, half of it will go towards new costs caused by the cap and floor – leaving a measly £2.5bn or so for workforce, training, councils and better integration with the NHS.
Minimum wage rise
There was much hype at the Tory conference that Boris Johnson would push up the minimum wage – only for him not to announce anything solid.
But the Mirror understands a standard annual rise for April 2022 is expected to be announced in the Budget.
Currently £8.91 an hour for over-23s (the ‘National Living Wage’), the Tories have claimed they’ll make it £10.50 an hour for over-21s by 2024.
That is because they claimed future rises would be pegged to two-thirds of median earnings, higher than the previous 60% target.
Rishi Sunak shouldn’t take too much credit for the April 2022 rise – after all, minimum wages rise every year, especially when inflation is up.
But given Boris Johnson has pinned his hopes on businesses creating a “high-wage” economy, no doubt he will try to take the glory.
Cigarette, alcohol and fuel duty changes
Tobacco duties tend to rise in the Budget – and could do so at 6pm on the same day to avoid bulk buying.
The last rise in November 2020 put 22p on a pack of 20 cigarettes and 65p on a 30g pack of hand-rolling tobacco.
Tobacco duties rise using an “escalator”, which last time was 2% above RPI inflation (or 4-6%for rolling tobacco). With inflation soaring, a similar escalator could impose a massive rise this year.
But rises on beer, cider, wine and spirits were all frozen in the year from April 2021. Now the whole structure of them could be overhauled (see below).
And fuel duty has been frozen for 11 years in a row and there’s no reason to suggest Rishi Sunak won’t make it a 12th.
These days, each year’s freeze alone is projected to cost the Treasury around £1bn a year by 2025. That’s money that could be spent on green initiatives, public transport and cycling. But the political hit of raising fuel duty when petrol prices have just spiked to a nine-year high would be enormous.
£500m for children and families – after years of cuts
The Chancellor has announced £500m for children and families, including £82m to set up family hubs in 75 new council areas.
These will be a ‘one-stop-shop’ to deliver parenting programmes (£50m), breastfeeding advice (£50m) and mental health support (£100m).
It confirms reports that Rishi Sunak wanted to focus on childcare in his Budget. The money also includes a £10m Start for Life offer, £10m on workforce pilots and £200m for expanding the Supporting Families programme.
But it comes after the Tories cut £20 a week from Universal Credit and imposed the two-child benefits limit. Nurseries also say they’re at breaking point, as the government doesn’t give them enough cash to run 30 hours’ a week free childcare properly.
The Lib Dems warned the cash is a “drop in the ocean” after years of Tory cuts to services like Sure Start. Shadow Education Secretary Kate Green added: “This is a smokescreen for the Conservatives’ failure to deliver for families.”
Neil Leitch, CEO of the Early Years Alliance, said: “To invest in these new initiatives while leaving the existing early years infrastructure to crumble is, frankly, negligent.”
Transport upgrades in eight regions of England
Manchester Evening News)
A £5.7billion list of transport upgrade projects for eight regions of England is set to be confirmed.
The Chancellor said projects will include improving the A61 between Wakefield and Leeds for buses, cyclists and pedestrians.
New Metrolink tram vehicles will be ordered in Manchester while rail stations are revamped in Darlington, Middlesbrough, Liverpool and Runcorn.
Overall Greater Manchester will get £1.07bn, West Midlands £1.05bn, West Yorkshire £830m, Liverpool City Region £710m, South Yorkshire £570m, West of England £540m and Tees Valley £310m.
The North East is set to get just over £600m but projects will not be spelt out until a regional governance shake-up is complete.
On top of the £5.7bn, Mr Sunak will pledge £1.2bn on buses by 2025 to “speed up journey times, simplify fares and increase the number of services” outside London, with details in the coming months.
But of the £6.9bn to be announced only £1.5bn is new money. The cash for city regions was already announced as £4.2bn and is being increased. The £1.2bn on buses comes from a £3bn pot Boris Johnson already announced in March.
£700m to revamp sports pitches
The Treasury says there will be £700million to “build or improve” up to 8,000 sports pitches across the UK.
Up to 300 youth facilities like scout huts, youth centres and activity centres, will also be built or refurbished in deprived areas.
V&A, Tate and Natural History Museum get cash
The Chancellor has confirmed a £850m pot over three years for local culture, museums and galleries.
Big bucks go to the V&A in London, Tate Liverpool and the Imperial War Museum in Duxford, which share £300m between them.
Likewise the Natural History Museum will get £125m to help build a new scientific research centre in Oxfordshire, and the British Library site at Boston Spa will get £77m.
It’s tougher competition for 110 other regional museums and libraries, who share £75m between them.
A fund for veterans’ health
The government has confirmed a Veterans’ Health Innovation Fund worth £5m over an unspecified timeframe.
It will provide research grants into finding new surgeries for amputees and blast victims, and new mental health treatment.
There will also be “new technology to help injured veterans rebuild their lives and participate in work, education and sport”.
Things that are tipped to be in the Budget
Public sector pay
In 2021/22 public sector pay rises were “paused”, except in the NHS and for workers on less than £24,000 who got a small rise.
Political pressure is huge not to do the same thing again, especially with inflation and fuel bills savaging families’ existing budgets.
But the problem for Rishi Sunak is, even a 2% or 3% rise in public sector wages would likely become a real-terms cut due to inflation.
And that means having to spend a huge amount on any proper pay rise. Will he take the hit? And when – will he announce his intentions in the spending review like he did in 2020, or wait for review bodies to report back next year?
A massive shake-up in alcohol duties
Treasury officials are said to see the current system of alcohol duties as outdated and complicated and want to smooth it out.
The Chancellor’s plans could see the cost of sparkling wine falling and some taxes on beer cut as well.
But the spirits industry fears it could also mean 5% hikes for whisky, gin and other spirits which they say will hamper their recovery after Covid and Brexit.
And craft and independent brewers fear changes to Small Breweries’ Relief (SBR). They say the government could more than halve the threshold for a 50% beer duty rate, piling £44,000 extra in beer duty costs a yer on 150 small breweries.
Society of Independent Brewers (SIBA) chief James Calder said: “The uncertainty over what will happen to SBR is causing a great deal of anxiety.”
A tax break for banks – at the same time as benefits are cut
The Financial Times reported the Chancellor will slash a tax surcharge on bank profits from 8% to 3%.
The move is supposedly designed to keep the City happy and prosperous as corporation tax rises from 19% back up to 25%.
But it could provoke fury as the Chancellor as refused to provide the £5bn needed to keep a £20-a-week Universal Credit uplift.
Universal Credit changes
DWP ministers have been lobbying Mr Sunak to raise Universal Credit for the 2.3million claimants who work – weeks after cutting it by £20.
They want the “taper rate” – the amount of Universal Credit withdrawn for every pound someone earns – to be cut from 63p to 60p to let working families keep more of their money.
The £1bn a year move would be the first taper change in five years, and would partially cushion the blow of the £20-a-week cut.
But sources were downbeat about whether Mr Sunak would accept the move. And even if a 3p change in the taper was approved, it would not come close to making up for the £20-a-week cut for most families.
A 25-year-old single mum working 40 hours a week on minimum wage could be £9.39 a week better off. But because UC is being cut by £20 across the board, she would still be £10.61 worse off than she is now.
Those still covered by work allowances, or too sick to work, would not benefit at all from changes to the taper.
A rise in Air Passenger Duty
Plane tickets to Australia, South Africa and Japan will become more expensive if an Air Passenger Duty rise goes ahead.
The Guardian reports the Chancellor will confirm previously-mooted plans to reform the tax, levying a higher rate on longer journeys.
Currently APD is charged in two bands – journeys under and over 2,000 miles. A new third band could cover distances over 6,000 miles.
End of the line for HS2 to Leeds
Fears are mounting that the Tories will abandon a key rail link to the Red Wall – despite promises it would go ahead.
Transport Secretary Grant Shapps refused to guarantee the eastern leg of HS2 – the high speed line to Leeds – would still be built.
The Spending Review could be a crucial time to confirm – or strangle off – funding to this project for the future.
Slashing VAT on household bills
Rishi Sunak could slash VAT on household energy bills to help struggling families through the winter cost of living crisis.
The Chancellor is reportedly considering cutting the 5% rate even though he has resisted pressure to splash taxpayers’ cash elsewhere.
But Treasury officials played down the likelihood of Mr Sunak announcing a cut amid concerns he might set a precedent – and send the wrong message ahead of a green summit.
No big business rates reform
The Treasury promised a ‘fundamental’ review of how business rates work back in March 2020.
But it’s thought we will not see any large-scale reform until next year after hopes to include it in this Budget fell apart.
That is despite the fact a major overhaul of business rates is getting more and more urgent. High Street shops say they’re being left at a disadvantage compared to online warehouse giants like Amazon.
No solid plan for ‘levelling up’
No doubt Boris Johnson and Rishi Sunak will take all the above announcements as evidence of their plan to ‘level up’ the Midlands and north of England.
But will there be a cohesive, coherent plan that spells out exactly what levelling up means?
Don’t bank on that – we’ve not seen it properly so far, and one source suggested a levelling up White Paper will only arrive the week after the Budget.