Rishi Sunak warned Budget 'is not going to feel great' as tax burden is highest ...

Rishi Sunak warned Budget 'is not going to feel great' as tax burden is highest ...
Rishi Sunak warned Budget 'is not going to feel great' as tax burden is highest ...

Rishi Sunak was facing a backlash against his big-spending Budget today as experts warned it 'it is not going to feel great' for taxpayers amid a cost of living crisis.

Experts said the scale of the spending he announced yesterday would see the state expand to its biggest size since the late 1970s, before Margaret Thatcher conducted a decade of reform to bring it under control. 

The Chancellor poured cash into hospitals and Boris Johnson's 'levelling up' agenda – declaring the Tories were now 'the real party of public services'.

There was also more money for an increase in the minimum wage to £9.50-per-hour, and he eased a cut to Universal Credit by tweaking the taper rate to lessen the impact on the working poor. 

But thinktank the Resolution Foundation said he was setting the country up for a flat recovery for living standards, as wages fall in real terms next year.

The Office for Budget Responsibility (OBR) said the Budget would leave the overall tax burden at its highest since the final period of Clement Attlee's post-war Labour administration 70 years ago.

Mr Sunak sought to reassure Tory MPs that he aims to cut taxes before the next election after unveiling his Budget. In a meeting of the 1922 Committee of Tory backbenchers he said he wanted to use 'every marginal pound' in the future to lower taxes rather than increase spending. 

But he was more coy on television today, telling Sky News it was his 'ambition is to lower taxes for people' and refusing to confirm he would cut income tax.

Paul Johnson, a respected economist at the Institute for Fiscal Studies, told the BBC today that large tax rises were coming, adding: 'I think the worry for the Chancellor is that he was very upbeat, he talked about a new age of optimism. But the high levels of inflation going forward, the fact there are very big tax rises coming and the growth is still pretty poor means we are not going to feel it.

'The average incomes are barely going to rise over the next years and indeed on the forecast yesterday, average earners will be worse off next year than they are this year, so this is not going to feel great.' 

He added: 'I would be very surprised if the tax burden in a decade’s time is less than it is now, indeed I wouldn’t be at all surprised if it is more.'

The Chancellor signalled to Tory backbenchers that tax cuts would come before the next election after he made changes that will increase the burden on everyday Britons to to its highest level in 70 years.

The Chancellor signalled to Tory backbenchers that tax cuts would come before the next election after he made changes that will increase the burden on everyday Britons to to its highest level in 70 years.

Paul Johnson, a respected economist at the Institute for Fiscal Studies, told the BBC today that large tax rises were coming, adding: 'I think the worry for the Chancellor is that he was very upbeat, he talked about a new age of optimism. But the high levels of inflation going forward, the fact there are very big tax rises coming and the growth is still pretty poor means we are not going to feel it'

Paul Johnson, a respected economist at the Institute for Fiscal Studies, told the BBC today that large tax rises were coming, adding: 'I think the worry for the Chancellor is that he was very upbeat, he talked about a new age of optimism. But the high levels of inflation going forward, the fact there are very big tax rises coming and the growth is still pretty poor means we are not going to feel it'

Public sector debt does not rise as high as previously under the latest OBR projections

Public sector debt does not rise as high as previously under the latest OBR projections 

In a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of year

In a stark assessment alongside the Budget, the Office for Budget Responsibility (OBR) said its central forecast is for headline CPI to peak at 4.4 per cent in the second quarter of year

Elsewhere in his keynote speech, the Chancellor poured cash into schools, hospitals and Boris Johnson's 'levelling up' agenda – declaring the Tories were now 'the real party of public services'

Elsewhere in his keynote speech, the Chancellor poured cash into schools, hospitals and Boris Johnson's 'levelling up' agenda – declaring the Tories were now 'the real party of public services'

Budget 2021: key points
Rishi Sunak said he was creating 'a stronger economy for the British people' He warned of continuing challenges from Covid  Office for Budget Responsibility says inflation expected to average 4 per cent over the next year, was 3.1 per cent in September. Sunak: 'The pressures caused by supply chains and energy prices will take months to ease.'  He outlined the 'most radical simplification of alcohol duties for over 140 years' that cuts number of rates paid from 15 to six. The stronger the drink the higher the rate, as some high-percentage beverages are 'under-taxed'  New 'small producer relief' to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).  'Draught relief' - a new, lower rate of duty on draught beer and cider.  Fuel duty rise cancelled for the 12th year in a row  Vehicle excise duty for heavy goods vehicles is frozen for a year   Suspension of HGV levy extended for another year  OBR says economy will return to pre-Covid levels at the turn of the year, earlier than expected Forecast 6.5 per cent growth this year, up from 4 per cent, then 6 per cent in 2022.  But lower rates of 2.1 per cent in 2023, 1.3 per cent in 2024 and 1.6 per cent in 2025  Unemployment forecast to peak at 5.2 per cent, lower than expected  Foreign aid budget will go back up to 0.7 per cent on GDP by 2024/2025, having been cut to 0.5 per cent Every Whitehall department will get a 'real terms rise in overall spending' as part of the Spending Review, amounting to £150 billion Borrowing as a percentage of GDP is forecast to fall, from 7.9% this year to 3.3 per cent next year, then 2.4 per cent, 1.7 per cent, 1.7 per cent and 1.5 per cent in the following years.  A levy will be placed on property developers with profits over £25 million at a rate of 4 per cent to help create a £5 billion fund to remove unsafe cladding  The national minimum wage will increase from £8.91 to £9.50 from April next year.  An extra £6billion will be given to the NHS to pay for new equipment and new facilities to clear the Covid backlog.  Brownfield sites covering the equivalent of 2,000 football pitches could be turned into plots for housing as part of a £1.8billion injection.  A £2.6billion pot of funding will be set up to help children with special educational needs and disabilities.  Levelling up transport outside of London will benefit to the tune of nearly £7billion, paying for a range of projects, including tram improvements.  The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas such as genome sequencing and tackling health inequalities.  A cash injection of £3billion will be given to both post-16 education but also to adults later in life.  £850million will be spent over three years to 'breathe life' back into cultural hotspots like London's V&A museum, Tate Liverpool and the Imperial War Museum in Duxford.  Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain's borders.  An 8 per cent cut to the Universal Credit taper rate meaning recipients keep more benefit money as they work 

 

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The Chancellor was mobbed last night as he headed to the pub hours after giving booze duty the biggest shake-up in 140 years by cutting the price of ale and prosecco in a £150billion Budget spending spree. 

Rishi Sunak was pictured surrounded by crowds of drinkers outside the Two Chairmen in Westminster late on Wednesday evening after delivering his speech in the House of Commons in the afternoon.   

The Chancellor used his Budget to set out a new Draught Relief policy which will see beer and cider duty reduced by five per cent. 

He said that amounted to the biggest cut on the tax on beer in 50 years and the 'biggest cut to cider duty since 1923'. 

The Chancellor added that his overhaul to duty would deliver the 'most radical simplification of alcohol duties for over 140 years', resulting in a 'simpler, fairer and healthier' system.   

Some Tory grandees last night questioned the decision to embark on even higher spending at a time when the national debt is already heading towards £2.5trillion.

But Mr Sunak said investing in a more innovative, high-skilled economy is 'the only sustainable path to individual prosperity'. 

And he vowed to start bringing taxes down by the end of this Parliament, saying it was time for the Tories to start making the 'moral' case for a smaller state.

Late last night, he went further in an address to Tory MPs – promising that every spare pound would now be diverted to a war chest designed to deliver tax cuts before the election. 

The Chancellor was boosted yesterday as the Office for Budget Responsibility (OBR) forecast that UK growth will now be 6.5 per cent this year – much higher than its previous forecast. 

It means the economy is now expected to recover to pre-pandemic levels by the end of this year – six months faster than expected. 

The Chancellor said Britain still faced 'challenging months ahead' – with inflation a looming threat.

But he said it was now time to start 'preparing for a new economy post-Covid... an economy of higher wages, higher skills and rising productivity. 

'Of strong public services, vibrant communities and safer streets. An economy fit for a new age of optimism.'

His consumer-friendly package of giveaways included a fuel duty freeze, a reform of alcohol taxes that will cut the price of many popular drinks, a major business rates cut for shops and pubs and reform of Universal Credit to help the lowest paid.

However, yesterday's official forecasts also warned that inflation could soar past 5 per cent next year, the highest in three decades. 

And the OBR modelled an increase in interest rates from 0.1 per cent to 3.5 per cent by 2023 – a move that would add hundreds of pounds a month to a typical mortgage.

Yesterday's Budget and Spending Review represented an uneasy compromise between the Chancellor and Prime Minister. Improved economic forecasts left the Chancellor with an extra £50billion a year to spend. 

But Mr Johnson insisted the bulk of the windfall should be spent on shoring up public services after the pandemic and delivering his levelling up agenda.

One ally of Mr Sunak said: 'It was the Chancellor's Budget, but it was the Prime Minister's spending review.' 

However, in a highly personal section of his speech yesterday, the Chancellor said it was time for the Tories to start making the 'moral' case for lower taxes and a smaller state.

Hinting at rumoured tensions with the PM, he said: 'By the end of this Parliament, I want taxes to be going down, not up.' 

The OBR said Mr Sunak had now presided over the biggest increase in taxes since the Black Wednesday debacle three decades ago.

The Chancellor said he disliked the tax hikes but had no choice in the wake of the pandemic. Last night he told Tory MPs he had 'set a clear and unambiguous intent to begin the process of reducing taxes'.

But some party grandees said cuts should have started immediately. Ex-Cabinet minister David Davis said higher taxes would 'undoubtedly' depress growth and employment. 

The Institute for Fiscal Studies said plans that focused on public services, benefits and wages meant the Chancellor's plans were 'more similar to Gordon Brown's than to George Osborne's'.

Shadow Chancellor Rachel Reeves said the Budget measures were 'not enough' to help families facing a cost-of-living crisis and told Mr Sunak: 'The Conservatives are now the party of high taxation.' 

Announcing the booze duty cut, The Chancellor said drinkers would save 3p per pint – the biggest tax cut to beer in 50 years.

The cost of English sparkling wine, prosecco and champagne will also fall, potentially cutting the cost by 53p a bottle.

However, the cuts will not take effect until February 2023.

In a separate announcement, the Chancellor also announced that a planned increase in duty on spirits, wine, cider and beer due to take effect from midnight last night had been cancelled.

Describing pubs as 'the home of British community life for centuries', he offered them help to 'bounce back' after the pandemic.

He said he was taking advantage of Brexit to deliver the £3billion tax cut to ease the cost of living.

The Chancellor was mobbed last night as he headed to the pub hours after giving booze duty the biggest shake-up in 140 years by cutting the price of ale and prosecco in a £150billion Budget spending spree. Rishi Sunak was pictured surrounded by crowds of drinkers outside the Two Chairmen in Westminster late on Wednesday evening after delivering his speech in the House of Commons in the afternoon

The Chancellor was mobbed last night as he headed to the pub hours after giving booze duty the biggest shake-up in 140 years by cutting the price of ale and prosecco in a £150billion Budget spending spree. Rishi Sunak was pictured surrounded by crowds of drinkers outside the Two Chairmen in Westminster late on Wednesday evening after delivering his speech in the House of Commons in the afternoon

Other measures which will please voters include the helping of the high street on business rates and the giving of support to 2million of the lowest paid

Other measures which will please voters include the helping of the high street on business rates and the giving of support to 2million of the lowest paid

In both scenarios, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now

In both scenarios, CPI inflation could go up to 5.4 per cent, with the OBR saying that the Bank of England base rate would need to soar to 3.5 per cent from the low of 0.1 per cent now

The headline CPI rate of inflation was 3.1 per cent in September, down slightly from the 3.2 per cent recorded in August. However, the Bank of England expects it to top 4 per cent in the coming months

The headline CPI rate of inflation was 3.1 per cent in September, down slightly from the 3.2 per cent recorded in August. However, the Bank of England expects it to top 4 per cent in the coming months 

Starmer misses Budget after testing positive for Covid... as Tories finally put on masks in chamber  

Keir Starmer was forced to pull out of the Budget with Covid today - as Boris Johnson led senior ministers in wearing a mask in the House of Commons.

The Labour leader's plight was revealed at the start of PMQs - with Ed Miliband standing in and shadow chancellor Rachel Reeves responding to Rishi Sunak.  

Mr Johnson was joined by Mr Sunak, Justice Secretary Dominic Raab and Health Secretary Sajid Javid in covering his face in the weekly Commons session.

But other Tory frontbenchers including Commons Leader Jacob Rees-Mogg and Scottish Secretary Alister Jack were among those still declining to take action to prevent the spread of Covid.

It is thought to be the fifth time that Sir Keir has needed to isolate.  

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Describing alcohol tax rates as outdated and too complicated, he added: 'We are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years.'

The Chancellor said the changes would 'create a system that is simpler, fairer, and healthier'.

Under the plans, duty on draught beer and cider will be cut by 5 per cent to encourage people back into pubs – the 'biggest cut to cider duty since 1923'.

He also cut the 28 per cent duty on premium sparkling wines such as prosecco and fruit ciders.

However, the changes to duties mean taxes will increase on some higher strength drinks, such as some red wine and 'white ciders'. Consumers of rosé, fruit ciders, liqueurs and lower strength beers and wines will pay less though.

From February 2023, there will be just six duty rates on alcohol, down from 15, guided by a 'common-sense principal' of 'the stronger the drink, the higher the rate'.

Mr Sunak said it was not a temporary measure, but a 'long-term investment in pubs of £100million a year and a permanent cut in the cost of a pint by 3p'.

There will also be a new 'small producer relief' which will include small cider makers for the first time, as happened with small brewers' relief. Duty is also being cut on fruit ciders to bring it in line with apple ciders.

Industry figures welcomed the moves, but questioned the need for a delay.

Emma McClarkin, chief executive of the British Beer & Pub Association, said: 'The Chancellor's decision to freeze beer duty... is to be warmly welcomed.'

She said it would help secure 9,000 vital jobs across the country. On the cut to draught beer and cider duty, she added: 'Pub-goers will also be toasting the Chancellor today for announcing a 5 per cent lower duty rate on draught beer.

'However, the overall beer duty rate in the UK remains amongst the highest in Europe.

'It is vital for brewers, a world-class, home-grown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.'

Miles Beale, chief executive of the Wine & Spirit Trade Association, said the decision not to raise duty was a 'huge relief'.

Public sector net borrowing will be lower than had been expected in March, thanks to the improved overall economic picture

Public sector net borrowing will be lower than had been expected in March, thanks to the improved overall economic picture

The tax burden is going to its highest level since the Second World War, despite Rishi Sunak's promise that he wants to cut it

The tax burden is going to its highest level since the Second World War, despite Rishi Sunak's promise that he wants to cut it 

But he said the new regime would still be unfair to people who enjoy wine and spirits, adding: 'We are mystified by a proposal that embeds unfairness between products, meaning that beer will be taxed between 8p – 19p per unit, wine increases to 26p per unit and spirits remain at 29p per unit.'

Andrew Carter, chief executive of the English sparkling wine company Chapel Down, said the delay to change the tax rules on fizz was surprising, adding: 'We would have preferred it to be sooner.'

John O'Connell, chief executive of the TaxPayers' Alliance, said: 'Punters, publicans and producers will be raising a glass to these reforms and cuts. Shaking up alcohol duties has been a long time coming.'

However, Shadow Chancellor Rachel Reeves said: 'At least the bankers on short-haul flights sipping champagne will be cheering this Budget today.'

VICTORIA BISCHOFF: This was the budget that literally leaves pensioners out in the cold... and young families will feel the pinch, too

Family finances are being pushed to breaking point. A perfect storm of relentless bill and price hikes, along with looming tax rises, means households are on the cusp of the biggest spending squeeze in a decade.

Inflation is now predicted to soar to as high as 5 per cent next year. Yet few workers will receive big enough pay rises to counter this.

And this means the pound in their pocket will simply not stretch as far.

Energy bills could soon rocket by an eye-watering £400 for the average household, after gas prices went through the roof. 

Petrol prices are at a record-high, despite a 12-year freeze on fuel duty.

Food prices are spiralling ahead of Christmas. 

And if interest rates rise as expected, it could also push up mortgage costs for homeowners who are not on fixed deals.

A National Insurance hike for workers next April, together with the freezing of income tax bands, will then pile yet more pressure on to overburdened budgets.

Rishi Sunak (pictured) failed to mention the word 'pensioner' once in his hour-long Budget speech yesterday

Rishi Sunak (pictured) failed to mention the word 'pensioner' once in his hour-long Budget speech yesterday

But of all households, few are facing a tougher time than the millions of pensioners on fixed incomes.

Yet Rishi Sunak failed to mention the word 'pensioner' once in his hour-long Budget speech yesterday. 

In fact, it's fair to say retirees are likely to wake up this morning feeling utterly abandoned.

There was just nothing in the Budget for them. Reforms to Universal Credit won't help them, and neither will the increase in the living wage. 

Yet it is widely recognised that pensioners are almost always hit hardest by rising prices.

How your household will be affected by the Budget depending on your total income (listed top, horizontally) and family arrangement (listed left, vertically)

How your household will be affected by the Budget depending on your total income (listed top, horizontally) and family arrangement (listed left, vertically) 

This is because for those aged 65 and above, food and energy costs represent a far bigger proportion of their typical household spending – largely because they spend more time at home and so need the heating on more.

These bills account for around 18 per cent of their typical monthly budget compared to 11 per cent for those under 30, according insurer Aviva.

So it is a particularly scary time for the millions of people who rely on the state pension to make ends meet – especially the poorest who have no other income.

But after the triple-lock promise was axed, the state pension is now expected to increase by only 3.1 per cent in April. 

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