Autumn Budget 2021
The Taxes, The Income and The media
Chancellor Rishi Sunak has set out the 2021 Autumn budget this afternoon, providing the framework for how the government will attempt to recover from the economic impact of multiple lockdowns. The official motto, ‘Build Back Better’, lays out high expectations for the efficacy of the financial strategies that have been laid out. Though covered officially in Parliament, the speaker’s comments before the Chancellor’s announcement seemed to indicate that perhaps too much of what was to follow had already been shared with the media.
Taxes, as expected, are at the heart of it. While the conservative position has proclaimed that increasing taxes run counter to their instincts, the hike in the national insurance contributions remains set for April of next year. The justification for breaking campaign promises not to increase taxation is the unpredictable nature of the pandemic and its historic deterioration of the economy. The national 1.25% increase will mean an extra £130 paid by an employee earning £20,000 a year and has been criticized for disproportionally impacting those on lower wages.
For these citizens, however, there is also positive news. First, the Council Tax increase of up to 6% that had been rumoured by some ministers did not come to pass, and so the tax will remain at where it has been after the above-inflation increases from last year. Most importantly, the National Living Wage is set to rise by 6.6%, meaning workers over 23 will now earn an hourly rate of £9.50, up from £8.91. And so, the 3.1% rise in the cost of living is counteracted by over double the percentage increase in income for these workers. This means an extra £1,074 over the year, before tax, for a full-time employee. Those already at or above this £9.50 rate will of course have to reckon with the reality of the living cost increase with no apparent benefits; except for perhaps the 3p discount on pints brought about by the new draught tax cut.
Regarding taxation, calls to re-extend the Stamp Duty Holiday, given its advantageous bolstering of the property market, have been ignored. This will please those who claimed it is dangerous to continue artificially stoking the market for fears of affecting long-term affordability. For those who believe Stamp Duty to be punitive and outdated in the first place, it is a disappointing return to the status-quo. This, combined with the reiterated increase in the cost of living and confirmed, global issues with scaling inflation, may prove detrimental to buyer enthusiasm.
The new income generated from increased taxes is said to be for the benefit of health and social care. It has been confirmed that £5.9 billion is committed to combating NHS backlogs, providing more funding for diagnostic services and elective surgeries. £2.1 billion is thought to be going into improving IT across the NHS, though this was not explicitly outlined in the announcement. It would come as no surprise, however, given the quite polemic outburst in response to the Track and Trace campaign being perhaps inappropriately reliant on Microsoft Excel.
Overall, it was revealed the total spending on healthcare is set to increase by £44bn, reaching £177bn by the end of the current parliament.
Property, Cladding And Affordability
Further commitments have been revealed for innovation in life sciences, upskilling and electric cars. Regarding property, the prime minister had already unveiled plans to offer up to £3.9 billion to decarbonize the heating of homes by giving grants for air-sourced heat pumps. This amount is said to only be enough for 90,000 heat pumps, leaving 20 million homes still to be decarbonized. However, the Chancellor has claimed house building will get the ‘largest cash investment in a decade’.
There is a promised multi-year investment of almost 24 billion to construct new homes. The expected development of brownfield land has been confirmed, with 1.8 billion dedicated to the project that intends to create one million new properties. An investment of 11.5 billion will be made through the Affordable Homes Programme. It is thought these numbers fall short of truly addressing the shortage of affordable homes but may alleviate some of the pressure. 5 billion is set out for the removal of unsafe cladding from high-rise buildings.
It can be challenging to foresee the real-world effect of figures on the national scale, so if you would like to know more about the local property market now or in the coming months then CONTACT US.