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
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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