Sunak’s opening remarks
Rishi Sunak says his budget delivers a stronger economy for the British people: stronger growth, public finances and employment. The chancellor says he will give people the support they need with the cost of living and levelling up.
He says the budget does not draw a line under Covid but does begin the work of building an economy post-pandemic.
Growth
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 6.5% this year.
Sunak says it will take until the start of 2022 for the economy to return to its pre-pandemic size.
GDP will grow by 6% next year, 2.1% in 2023, 1.3% in 2024, 1.6% in 2025, and 1.7% in 2026.
In March, the OBR had forecast growth of 4% this year, after a plunge of 9.9% in 2020 – the worst recession for 300 years.
The OBR’s estimate for long-term scarring for the economy has been revised down from 3% to 2%.
Unemployment is forecast to peak at 5.2% in the fourth quarter of 2021.
In July 2020, the OBR had forecast unemployment would peak close to 12% by the end of that year due to the end of furlough. However, the scheme was extended until the end of September 2021.
Spending review
- Sunak says there will be a real-terms rise for every government department.
- Departmental spending in this parliament will rise by £150bn, in the “largest increase this century”. Spending will grow in real terms by 3.8% a year.
- Sunak says: “If anybody still doubts it, today’s budget confirms it. The Conservatives are the real party of public services.”
- The Institute for Fiscal Studies estimates average real-terms annual growth in departmental resource budgets was higher in previous years, above 4% in 2000 and 2002 under Labour, and 4.1% under the Conservatives in 2019.
- There will be grant funding for local government of £4.8bn, the “largest increase in core funding for over a decade”.
- Overseas aid will return to 0.7% of GDP by the end of the parliament, after a cut to 0.5% announced last year.
Levelling up
- Sunak announces £1.7bn of funding in the first grants from the Treasury’s Levelling Up Fund, for towns and cities including Stoke-on-Trent, Leeds, Doncaster and Leicester.
- The funding includes allocations to constituencies held by the Labour leadership, he indicates: “We’re so committed to levelling up we’re even levelling up the opposition front bench.”
- Libraries will be “renovated, restored and revived”.
- Tax relief on museums and galleries was due to be announced in March next year; it will be extended until March 2024.
Infrastructure and investment
- The chancellor says he will increase investment to support London-style transport across the regions of England.
- The government will invest £21bn on roads and £46bn on railways to improve journey times between cities.
- Sunak announces the government’s target for hitting research and development spending will reach £22bn by 2026-27, two years later than had been initially planned.
- The government will invest £20bn in R&D by 2024-25. Sunak says this stands as a “record investment to secure the UK’s future as a global science superpower”.
- Sunak announces he will limit tax relief for business R&D spending so that it only applies to domestic activities.
