Chancellor of the Exchequer Rishi Sunak delivered Wednesday his Budget speech to MPs in the UK Parliament's House of Commons setting out tax and spending plans, including a 42% increase in spending on skills.
He said: "We're increasing skills spending, over the Parliament [until 2024], by £3.8 billion — an increase of 42%."
Apprenticeships funding in England would increase to £2.7 billion in 2024–2025, it was announced.
Sunak announced a UK-wide numeracy service — "Multiply" — which would help 500,000 adults improve their numeracy skills.
Andrew Harding, FCMA, CGMA, chief executive–Management Accounting at the Association of International Certified Professional Accountants, said the Chancellor's focus "on building a high-skill economy, his renewed commitment for upskilling the UK's workforce, and delivering the government's 'levelling up' agenda" was welcome.
Sunak said that combined with tax reliefs, "total public investment in R&D is increasing from 0.7% of GDP in 2018 to 1.1% of GDP by the end of the Parliament".
Harding said: "We especially welcome his pledges to increase spending [on] skills by £3.8 billion and spend £20 billion a year on R&D over this Parliament, which will help boost innovation, stimulate long-term growth, and contribute to building a lasting recovery for the country."
He added there was a need for "a long-term plan to sustain these ambitions" and for an environment "to support lasting behaviour changes around investment and skills".
Sunak said that revised forecasts by the UK's independent fiscal watchdog, the Office for Budget Responsibility (OBR), pointed to a 6.5% GDP increase this year, followed by growth of 6% in 2022 and 2.1%, 1.3%, and 1.6% over the following three years.
On UK inflation, the Chancellor said: "Inflation in September was 3.1% and is likely to rise further — with the OBR expecting CPI [consumer prices index] to average 4% over next year."
Inflationary pressures came from two global forces, he said. "First, as economies around the world reopen, demand for goods has increased more quickly than supply chains can meet. … And second, global demand for energy has surged at a time when supplies have already been disrupted, putting strain on prices."
Many of Sunak's spending announcements had already been made in the run-up to the Budget. They included the lifting of the public sector pay freeze, funding of £5.9 billion for NHS England to tackle a backlog of tests and scans, and an increase from April 2022 of the National Living Wage from £8.91 per hour to £9.50.
Also, it was earlier announced that England's City regions such as Greater Manchester are to receive an additional £1.5 billion for transport projects. This figure is in addition to £4.2 billion promised in 2019. Education also will receive more investment, including £1.6 billion for 16- to 19-year-olds' education in England and £550 million for adult skills in England, it was previously announced.
New fiscal rules
Sunak outlined two new fiscal rules to be met by the third year of every forecast period. He explained: "First, underlying public sector net debt, excluding the impact of the Bank of England, must, as a percentage of GDP, be falling. Second, in normal times the state should only borrow to invest in our future growth and prosperity. Everyday spending must be paid for through taxation."
The Chancellor also set out government departmental spending for the next three years in the Comprehensive Spending Review, announcing spending growth of 3.8% a year in real terms, with overall spending rises for every single department.
The Chancellor's measures also included:
- A new 50% business rates discount for retail, hospitality, and leisure businesses in England in 2022–2023, up to a maximum of £110,000, and a government commitment to modernise the business rates system with more frequent revaluations — every three years. Further, there will be a freezing of the "business rates multiplier" for a further year, a tax cut worth £4.6 billion over five years.
- Modernising the UK's Tonnage Tax regime for the shipping industry.
- A 50% cut in Air Passenger Duty for flights between airports in England, Scotland, Wales, and Northern Ireland and a new rate of Air Passenger Duty of £91 on flights of 5,500 miles or more.
- The establishment of new trade and investment hubs in Cardiff and Belfast and the expansion of the existing Edinburgh trade and investment hub.
- £6.1 billion to back the Transport Decarbonisation Plan, to increase the number of zero-emission vehicles, helping to develop greener planes and ships, and encouraging more trips by bus, bicycle, and foot.
- A reinstatement of the government's commitment to spend 0.7% of GDP on foreign aid by 2024–2025.
- An increase to the British Business Bank's regional financing programmes to £1.6 billion.
HM Treasury also issued supporting Budget and Spending Review documents.
In its pre-Budget and CSR submission to the Chancellor, CIMA made a number of proposals to increase resilience in the UK's public finances, for UK citizens, for SMEs, and for the wider economy.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.