Alcohol, fuel and tax: Key announcements from the budget
Here are the key points from Chancellor Rishi Sunak’s budget speech:
• The chancellor says there are “challenging” months ahead, adding that inflation in September was 3.1% and is likely to rise further – the OBR expect it to average 4% over the next year
• Pressures caused by supply chains and energy crisis will “take months to ease”.
• Economy to return to its pre-COVID level at the turn of the year – an improvement on OBR forecasts revealed in March
• Economy expected to grow by 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years
• In July last year, at the height of the pandemic, unemployment was expected to peak at 12% but the OBR now expect it to peak at 5.2%
• Compared to 2020, wages have grown by 3.4%
• Underlying debt is forecast to be 85.2% of GDP this year
• It will reach 85.4% in 2022-23, before peaking at 85.7% in 2023-24
• It then falls in the final three years of the forecast from 85.1% to 83.3%
• Total departmental spending over this parliament will increase by £150bn, growing by 3.8% a year in real terms
• Spending on healthcare to increase by £44bn to over £177bn by the end of this parliament
• Extra revenue from health and social care levy will go towards NHS and social care as promised
• Health budget will be the largest since 2010, with record investment in research and development, better screening, 40 new hospitals and 70 hospital upgrades
• Mr Sunak says the budget funds an ambition to recruit 20,000 new police officers
• Extra £2.2bn for courts, prisons and probation services, including £500m to reduce the backlog in courts
• Programmes to tackle neighbourhood crime, reoffending, county lines crimes, violence against women and girls, victims’ services, and improved response to rape allegations
• £3.8bn for the “largest prison-building programme in a generation”
• £11.5bn to build up to 180,000 affordable home – 20% more than the previous programme
• £1.8bn to bring 1,500 hectares of brownfield land into use
• £640m a year to help those who are rough sleepers and homeless
• £5bn to remove unsafe cladding from the highest risk buildings, partly funded by a residential property developers’ tax, which will be levied on developers with profits over £25m at the rate of 4%
• £21bn for roads as part of a larger investment in transport
• £2.6bn for upgrades of over 50 local roads
• More than £5bn for road maintenance – enough to fill one million more potholes a year
• More than £5bn for buses, cycling and walking improvements
• HGV levy (previously suspended until August) will now be suspended until 2023
• Vehicle excise duty for heavy goods vehicles to be frozen
• Funding to improve lorry park facilities
• £46bn investment in railways, with an integrated rail plan to be published soon
• £5.7bn for London-style transport settlements in Greater Manchester, Liverpool City Region, Tees Valley, South Yorkshire, West Yorkshire, West Midlands, West of England
• £300m for parenting programmes for families, tailored services to help with perinatal mental health
• £150m to support training and development for early years workforce
• £200m for Supporting Families programme which helps families with varied needs
• Over £200m to continue the holiday activity and food programme
• £560m for youth services – enough to fund up to 300 youth clubs in England
• More than £200m to build or transform up to 8,000 community football pitches in the UK
• £2bn new funding to help schools and colleges, bringing total support (some already announced) to almost £5bn
• Restoring per pupil funding to 2010 levels in real terms, equivalent to a cash increase for every pupil of more than £1,500
• 30,000 new school places for children with special needs and disabilities
• New 50% business rates discount for businesses in the retail, hospitality and leisure sectors, including pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms
• This will mean any eligible business can claim a discount up to a maximum of £110,000 – a tax cut worth almost £1.7bn
• Mr Sunak says that, together with small business rates relief, this means more than 90% of all businesses in these sectors will see a discount of at least 50%
• An overhaul of alcohol duty, cutting the number of main duty rates from 15 to six – the stronger the drink, the higher the rate
• Small producer relief will extend the principle of small brewers’ relief to small cidermakers and others making alcoholic drinks of less than 8.5% ABV
• Sparkling wines will pay the same duty as still wines of equivalent strength, rather than the 28% they currently pay. Duty will also be cut for fruit cider
• Planned rise in fuel duty will be cancelled, meaning that – after 12 consecutive years of frozen rates, the average car driver will save a total of £1,900
• National living wage to increase next year by 6.6% to £9.50 an hour. For a full time worker, that’s a pay rise worth over £1,000
• This move will help more than two million of the lowest-paid workers, Mr Sunak says
• Mr Sunak says his goal is to reduce taxes and the universal credit taper, which reduces financial support as people work more hours, is in his sights
• The rate is currently 63%, so for every extra £1 someone earns, their universal credit is reduced by 63p. Mr Sunak announces plans to cut this by 8 percentage points (from 63% to 55%). This will come into effect “within weeks”
• Work allowances being increased by £500 – combined with the change to the taper, this is a tax cut worth more than £2bn, he says. Nearly two million families will keep, on average, an extra £1,000 a year
KitKats, Gaviscon, toothpaste, and even Freddo have all fallen victim to shrinkflation, consumer group Which? has found.
As families struggle with the cost of a trip to the supermarket, a survey of shoppers revealed how many products are getting smaller – while others are being downgraded with cheaper ingredients.
Among the examples are:
• Aquafresh complete care original toothpaste – from £1.30 for 100ml to £2 for 75ml at Tesco, Sainsbury’s and Ocado
• Gaviscon heartburn and indigestion liquid – from £14 for 600ml to £14 for 500ml at Sainsbury’s
• Sainsbury’s Scottish oats – from £1.25 for 1kg to £2.10 for 500g
• KitKat two-finger multipacks – from £3.60 for 21 bars to £5.50 for 18 bars at Ocado
• Quality Street tubs – from £6 for 600g to £7 for 550g at Morrisons
• Freddo multipacks – from £1.40 for five bars to £1.40 for four bars at Morrisons, Ocado and Tesco
Which? also received reports of popular treats missing key ingredients, as manufacturers seek to cut costs.
The amount of cocoa butter in white KitKats has fallen below 20%, meaning they can no longer actually be sold as white chocolate.
It comes after Penguin and Club bars lost their legal status as a chocolate biscuit, as they now contain more palm oil and shea oil than cocoa – as reported in the Sky News Money blog.
Which? retail editor Reena Sewraz called on supermarkets to be “more upfront” about price changes to help households “already under immense financial pressure” get better value.
While keeping track of the size and weight of products can be tricky, Which? has two top tips for detecting shrinkflation.
The first is to be wary of familiar products labelled as “new” – because the only thing that’s new may end up being the smaller size.
Meanwhile, the second is to pay attention to how much an item costs per 100g or 100ml, as this can be an easy way of finding out when prices change.
What have the companies said?
A spokeswoman for Mondelez International, which makes Cadbury products, said any change to product sizes are a “last resort”, but it’s facing “significantly higher input costs across our supply chain” – including for energy.
A Nestle spokesman said it was seeing “significant increases in the cost of coffee”, and some “adjustments” were occasionally needed “to maintain the same high quality and delicious taste that consumers know and love”.
“Retail pricing is always at the discretion of individual retailers,” they added.
A spokesman for the Food and Drink Federation also pointed to government policy, notably national insurance increases for employers and a new packaging tax.
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Is inflation reaching its peak?
Fresh food prices on the rise
The Which? report comes as latest figures showed fresh food costs 4.3% more than it did a year ago.
The increase in October, reported by the British Retail Consortium (BRC) and market researchers NIQ, was up on the 4.1% year-on-year rise in September.
Overall food inflation was down slightly, though, to 3.7% from last month’s 4.2%.
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There has also been a slowdown in overall shop price inflation, which the BRC said was down to “fierce competition among retailers” ahead of Black Friday sales.
The annual shopping extravaganza will this year arrive in the same week as the chancellor’s budget, which is set for Wednesday 26 November.
BRC chief executive Helen Dickinson called on Rachel Reeves to help “relieve some pressures” keeping prices high, with the national insurance rise in last year’s budget having “directly contributed to rising inflation”.
“Adding further taxes on retail businesses would inevitably keep inflation higher for longer,” Ms Dickinson warned.
Business
Petrofac administration not a great start to the week for Ed Miliband though relief could come
More than 2,000 Scotland-based jobs are at risk as oil and energy services group Petrofac has applied for administration.
The group’s operations will continue to trade, and options for restructuring of the company and a possible merger or acquisition are being actively explored with its key creditors, the company said on Monday.
People close to the company say they are hopeful a buyer can be found swiftly for its North Sea operations, with one suggesting that it could even happen in the coming days.
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Administrators will work alongside company management to “preserve value, operational capability and ongoing delivery”, its announcement read.
News of a possible insolvency announcement was first reported by Sky News.
Energy Secretary Ed Miliband and other ministers have been briefed on the situation.
An advisory firm, Kroll, had been engaged by the Department for Energy Security and Net Zero to work with ministers and officials on the unfolding crisis for the company.
What is Petrofac?
Petrofac employs about 7,300 people globally, according to a recent stock exchange filing.
It designs, constructs and operates offshore equipment for energy companies.
The company has been valued at more than £6bn but has been struggling with debt.
It also faced a Serious Fraud Office investigation, which resulted in a 2021 conviction for failing to prevent bribery, and the payment of millions of pounds in penalties.
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Founded in 1981 in Texas, the business has been in talks about a far-reaching financial restructuring for more than a year.
A formal restructuring plan was sanctioned by the High Court in May this year with the aim of writing off much of its debt and injecting new cash into the business.
This was subsequently overturned, prompting talks with creditors about a revised agreement.
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