Autumn Budget 2021 Overview
Craig is joined by Financial Adviser and regular guest, Jason Murgatroyd to discuss the Autumn Budget.
What was your response to the Budget?
I was quite shocked by the end of it, obviously, given everything that’s happened over the last 18 months. We were really expecting quite a bit of meat on the bone, but there were no major bombshells.
What I was expecting was announcements about tax going up. Rishi Sunak has talked a lot about levelling up as the undertone of the budget. Yet post Covid, there’s a lot of encouragement because the economy is not as bad as we all thought it might be.
Coming off the back of Brexit, the pandemic hit the UK doubly hard, which is why we imagined this was going to be a really meaty budget.
What were the main announcements?
Minimum Wage: A good development is that the minimum wage is going up from £8.91 up to £9.50. The median average wage that they’re trying to get to is still some way off, but this is encouraging for lower paid workers.
Public sector pay: The freeze on pay increases in the public sector is ending. So potentially, if you work in the public sector, you might get a salary increase in the next 12 months.
Inflation: This is always something that is associated with financial advice as it’s so important in terms of growing people’s money. The government is predicting an inflationary figure of about 4% within the next twelve months which is significant.
It’s good in terms of alternative investments and capital growth – and it just adds to why you need to look beyond deposit accounts. They’re just not keeping pace with inflation. But we’ve also got to watch what happens with interest rates, as well. The prediction is that interest rates will rise by the end of the year and we are seeing a lot of people come in to remortgage and lock in a low rate of interest.
Oil prices: The price of a barrel of oil has doubled in price, which is the key reason behind gas and energy prices going up so much. There are potentially some scary figures that people might soon be paying for gas, electricity and petrol which could counter the increase in minimum wage.
Unemployment: Unemployment is now at 5.2% which is a very low figure. It’s great to see that about 50,000 new nurses are now predicted to be joining the NHS and there’s a lot of money going into national health.
Housing developments: Big investments will help convert brownfield sites into new housing. There is also a new 4% property developer tax, which will raise £5 billion to help address the cladding issues for apartment blocks. There is also a goal to build a million new homes, including 180,000 affordable homes, which is encouraging.
Retail and hospitality: Retail, hospitality and leisure businesses will get a 50% discount on business rates. It’s nice to see support going in that direction – the high streets are unrecognisable at the moment. It’s just really sad to see how much they have struggled.
Alcohol duty rates: Tax is now weighted in line with alcohol strength – the higher the alcohol strength will have the highest duty rates. There is a boost for craft producers creating beers at less than 8.5% alcohol volume. A further duty benefit affects sparkling wine, which has always had higher duty than still wine; and duty has been reduced on fruit ciders.
Fuel duty: The increase to fuel duty has been cancelled, which is a response to public pressure after the recent issues with fuel prices.
Universal credit taper: This is seen as a tax against people actively looking to get to work, so this has been cut from 63% down to 55%. This is different to the £20 a week reduction of credit post-pandemic.
What else did you take from Rishi Sunak’s speech?
A key theme was investment for the future. The gist was that when things seem set against you, it is a time to keep your head down and invest for the future, because things will get better. It’s a great message to share with clients for personal investments too.
Another key point was that we shouldn’t rely on the government every time something happens, you’ve got to look after things yourself. And we shouldn’t seek to blame the government for everything, either.
There were also positive messages from the housing sector. Overall, it did seem that things are not as bad as we had expected. Thinking back to 18 months ago, when everything was going into lockdown, we had no idea what would happen and how bad things might get. And it’s great to hear that the economy hasn’t been as badly affected as we had thought.
So, in general it was quite an encouraging budget without too many big shocks or tax rises. The things to watch now will be inflation and house prices, which I’m sure we’ll cover in future editions.