Rishi Sunak on Wednesday promised help for families with the cost of living as he sought to build a “more innovative, high-skill” economy fuelled by the “imagination and drive of entrepreneurs”.
The Chancellor unveiled his vision for post-pandemic Britain, pledging to build a “stronger economy” after the chaos of Covid and to give families “the tools to build a better life for themselves”.
A faster recovery than predicted in March loosened constraints on Mr Sunak but many households across the UK are facing tighter budgets this winter from the threat of higher inflation, rising energy bills and tax hikes in the spring.
Responding to their worries in Wednesday’s Budget, he offered “help for working families with the cost of living”.
The Chancellor added: “We will always give families the support they need and the tools to build a better life for themselves.”
One way he could help struggling households on low incomes is through changes to Universal Credit after the £20-a-week pandemic uplift was recently cut.
However, many families fear that pay rises and extra support will be eaten up by higher energy bills and inflation if it soars in coming months.
After firefighting the economic blows from the pandemic with a package costing more than £400 billion including furlough and loan schemes, Mr Sunak used his third Budget to lay out how he now wants to reshape Britain into a “high wages, high skills and high productivity” economy.
“This Budget is about what this Government is about,” he said. “Investment in a more innovative, high-skill economy… because that is the only sustainable path to individual prosperity.”
He sought to balance spending with strict fiscal discipline to show his determination to bring Britain’s public finances back under control, with the nation’s debt mountain having soared to more than £2 trillion.
After recent government bust-ups with bosses over labour market shortages and Brexit, Mr Sunak attempted to build bridges, vowing to “back business”. He stressed: “Our future cannot be built by government alone but must come from the imagination and drive of our entrepreneurs.”
Mr Sunak spoke to the Queen on Tuesday about the Budget after she was forced to pull out of attending next week’s Cop26 climate change summit.
It is understood the 95-year-old monarch did not meet the Chancellor in person as is the norm and spoke to him from Windsor Castle, where she is staying following medical advice to rest.
Mr Sunak and Boris Johnson were expected to visit a brewery after the Budget, sparking speculation that there will be changes to alcohol taxation.
His statement to the Commons, outlining an economy “fit for a new age of optimism”, came amid a less gloomy background than the March budget.
Tax receipts have risen more quickly than expected as the recovery has gained pace, with the furlough scheme saving millions of people from unemployment, and borrowing so far this year coming in tens of billions below forecast in the spring.
GDP for 2021/22 had been predicted to rise by four per cent and some reports suggested this could now go up to around seven per cent.
Economists will pore over the details of the Budget and the Comprehensive Spending Review which sets out three-year budget allocations for Whitehall departments, to establish the full picture of tax and spending plans, including whether council taxes could rise.
However, Labour leader Sir Keir Starmer claimed the Government “gives with one hand — and then takes even more with the other”.
Millions of families face rising tax bills in the spring including from the 1.25 percentage point rise in National Insurance contributions to fund a £12 billion-a-year boost to the NHS and social care.
Environmentalists will scrutinise the Budget to see if enough funding has been earmarked for the net zero strategy.
The Chancellor was able to take advantage of a fiscal windfall as tax revenues rise and public borrowing falls more quickly than forecast.
For 2021/22, public borrowing was projected to be £234 billion, according to the Office for Budget Responsibility in March, but is now heading towards being tens of billions lower.
The long-term damage to the economy, known as “scarring”, is also expected to be significantly lower than the feared three per cent below the pre-pandemic trajectory.
Tory MPs hope that the economy will remain strong enough for Mr Sunak to build up a war chest for pre-election tax cuts.
For the Government’s “levelling up” agenda, the Chancellor announced a string of initiatives including an extra £1.5 billion to boost a fund for transport infrastructure outside London to £7 billion.
Tens of thousands of new homes are also to be built on derelict and unused land through a £1.8 billion package.
Some £150 million will go for regional Dragons’ Den-style “angel investors” to encourage entrepreneurs to set up firms outside London and the South-East.
Mr Sunak announced £5.9 billion of NHS capital spending including to address waiting lists, currently at 5.7 million people and set to rise further, possibly to seven million.
Out of this sum, £2.3 billion will be used for diagnostic services, such as CT, ultrasound and MRI scans.
Meanwhile, £2.1 billion will be allocated for technology and data to improve digital systems within hospitals and mental health care centres.
There was £200 million more for the Supporting Families Programme to help about 300,000 of the country’s most vulnerable households deal with “complex issues that could lead to family breakdown”.
A further £80 million will go to a network of “Family Hubs”, which Labour says are very similar to its Sure Start scheme.
And £2.6 billion will be allocated over three years to create up to 30,000 more school places for children with special educational needs and disabilities.
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