Budget 2021 live blog: Countdown to 27 Octby
AccountingWEB’s unique community blog is back in action for the autumn Budget. Follow all the rumours and policy steers ahead of Rishi Sunak’s speech on Wednesday 27 October.
With plans to raise extra revenue to repay the pandemic borrowing explosion and spending commitments such as levelling up and burnishing the UK’s green credentials ahead of COP26, Chancellor Rishi Sunak will try to strike a delicate balance on Budget day (27 October). Stay tuned to see which way the portents are pointing...
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Where is the support for hard-hit hospitality businesses?
27 Oct, 11:45 - Marvin Rust, managing director and European practice leader of Alvarez & Marsal Tax, who specialises in advising clients in the leisure and hospitality industry, said: “Many of the support measures in place are due to fall away in the next two years. The Chancellor appears to have pre briefed a lot of the contents of the Budget already, and it is worrying that there has, so far, been little announced to support businesses beyond this period and ‘turbo-charge’ growth for the long term."
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Chancellor leaves Downing Street
27 Oct, 11:10 - The Chancellor has left Downing Street with the red box in hand - with so many leaks ahead of the day, will it still hold any surprises?
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A few suggestions from AccountingWEB members
27 Oct, 11:00 - With everyone else having their say, AccountingWEB members have been shooting the Budget breeze in an overnight Any Answers thread. One of the most thoughtful comments so far came from Customs & VAT contributor Jason Croke, who predicted:
“Maybe another SDLT holiday, as if BTL landlords didn't have enough of a chance to fill their boots a little more.
“Generally I'm not in favour of VAT cuts, [as they rarely get] passed onto the consumer.
“A cut in domestic gas might save the household £50 a year, set against a £400 rise in gas prices because of the price cap....hmm, best not bother.
“I do expect something about Freeports, they are part of 'building back better'.”
For more instant analysis and to share your reactions with our Budget experts, join us at noon for the return of AccountingWEB’s Live Budget panel.
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A post-Covid Budget?
27 Oct, 10:45 - With the pandemic seeming far from over, many have been calling for the government to stop labelling today's proceedings as a 'post-Covid Budget'. The BBC took to Twitter to call out the Chancellor in his promises to the public:
The UK government borrowed heavily to cope with Covid
Now, Chancellor Rishi Sunak has to balance the books and pay for spending promises https://t.co/U0goWabOTt
— BBC News (UK) (@BBCNews) October 27, 2021
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Financial Times: Sunak promising ‘fiscal discipline’
Oct 27, 10:40 - Kudos to the FT’s Budget scouts George Parker and Chris Giles for getting their hands on what reads suspiciously like a draft of the Chancellor’s Budget speech.
If they’re right, expect to hear phrases like “a new age of optimism” as the Budget lays the groundwork for “a new economy post-Covid”.
All the pre-speech buzz phrases are in there, including “strong public services”, “levelling up” and the “green industrial revolution” being touted by the Prime Minister ahead of next week’s COP26 meeting.
While the Treasury and HMRC seem to have forgotten to create November 2021 Budget landing pages on their websites, the Chancellor’s team can find time to brief its favoured Fleet Street correspondents. Apart from raising questions about the primacy of Parliament (see below), if you can get your hands on the script beforehand, where is the drama and suspense that draws the crowds on Budget day?
If the Chancellor takes away all the fun of Budget bingo, will anyone be bothered to devote their Wednesday afternoons to his annual pantomime?
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A sticky situation
27 Oct, 10:30 - A member of the public has glued themselves to a road just off the M25 in protest of today's speech. People can be seen waving banners screaming the words 'insulate Britain' - police appear to be attempting to deal with the situation whilst traffic builds up behind the scene.
— GB News (@GBNEWS) October 27, 2021
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27 Oct, 10:00 - In a snap from the Treasury this morning, the public can rest assured that the Chancellor has budgeted for his blood sugar levels with a stocked up supply of mid-speech snacks ready to roll out alongside the red briefcase.
The Chancellor’s taste in sugary treats and relaxed footwear prompted Aweb editor Richard Hattersley to quip earlier this morning, “My kind of Chancellor.”
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Tax the rich
27 Oct, 9:30 - Ahead of today's Budget, Zarah Sultana MP has written to the Chancellor calling for "tax rises on the super-rich" in hopes of averting the winter poverty crisis and creating a more equal, sustainable society.
Richard Burgon MP, however, is not optimistic in Sunak's intentions to introduce a wealth tax:
If we put a 10% tax on wealth above £100m, we'd raise £69 BILLION!
Remember that at tomorrow's Budget every time you hear the Tories claiming there's no money to eradicate homelessness, end child poverty, scrap the £20 Universal Credit cut or give nurses a proper pay rise.
— Richard Burgon MP (@RichardBurgon) October 26, 2021
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"Yes, absolutely resign!"
27 Oct, 9:15 - Commons’ Speaker Lindsay Hoyle has made a public plea of frustration in wake of the Government briefing Budget announcements to the media before MPs. While ex-Chancellors have been forced to resign or simply chosen to walk over Budget leaks, this year the Treasury has sent out 16 different press releases prior to today's speech.
Speaker Lindsay Hoyle tears into the Government & calls for Ministers to resign if they leak info to the press before Commons announcements:
"At one time, Ministers did the right thing if they briefed before a Budget. They walked... Yes, absolutely resign! It's not acceptable." pic.twitter.com/lgPwWrbeoW
— Adam Schwarz (@AdamJSchwarz) October 25, 2021
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Sunak dresses down for pre-Budget briefing
27 Oct, 9:00 - Sunak is up early this morning preparing for his third Budget looking much more casual than his usual tailored suits. The Budget may be underwraps until midday, but fashion watchers are alreay giving Sunak a dressing down over his Palm Angels sliders and white socks.
| NEW: Rishi Sunak’s pre budget photo wearing socks and sliders pic.twitter.com/Rcmwojog28
— Politics For All (@PoliticsForAlI) October 26, 2021
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Get the latest Budget analysis at AccountingWEB Live Expo
AccountingWEB will be reporting throughout the day on the major announcements that will affect your clients. We will have further analysis at AccountingWEB Live Expo at the Coventry Building Society arena on 1-2 December.
Tax experts like Rebecca Benneyworth, Peter Rayney, Anita Monteith, Paul Aplin, Rebecca Seeley Harris and more will be there to break down the main tax and business measures.
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Will Rishi pull a universal credit rabbit out of the hat?
27 Oct, 8:30 - According to The Sun, Rishi Sunak is set to slash the universal credit taper down to 60p in a Budget surprise.
The tens of billions” of headroom Sunak has at his disposal will apparently free up the Chancellor to reform the universal credit taper. A former cabinet minister told the Sun: "The present situation penalises taking on more work, the opposite of what Universal Credit is supposed to do."
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Labour's Reeves would cut VAT on energy bills
27 Oct, 8:00 - The shadow chancellor has called on Rishi Sunak to deliver a Budget that would "take the pressure off working people". Writing on Twitter on the morning of the Budget, Rachel Reeves reiterated Labour's desire to grow the economy with their climate investment pledge.
Reeves signed off the tweet by signalling that Labour would tackle VAT on domestic energy bills.
Today's Budget must create a more resilient economy & take pressure off working people.
Labour will grow our economy with our Climate Investment Pledge, and our plan to buy, make & sell more in Britain.
With costs rising, we'd cut VAT on domestic energy bills now for 6 months.
— Rachel Reeves (@RachelReevesMP) October 27, 2021
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Sunak prepares for the Budget
There doesn't seem to be much visible pre-match nerves in this photo the Chancellor shared on Twitter this afternoon. Looks like Sunak is spending this evening swotting up on some last minute Budget prep. All will be revealed tomorrow lunchtime.
Tomorrow’s Budget and Spending Review will deliver a stronger economy for the British people.
— Rishi Sunak (@RishiSunak) October 26, 2021
A plea on behalf of small businesses
26 Oct, 16:00 - With everyone else sounding off about their Budget suggestions, FreeAgent co-founder and CEO Roan Lavery got in on the act with a set of suggestions to support the SME sector, which he called “the backbone of our economy, representing around 99% of businesses in the UK”.
In an email to AccountingWEB, Lavery wrote: “Small businesses have been hit badly by the economic turmoil from issues such as Covid-19 and Brexit, and should be our top priority on the road to recovery.”
The message continued: “Unlike their larger counterparts, small businesses are commonly dependent on month-to-month success and do not have the same footing larger corporations do to simply stay afloat. With many of these smaller businesses still feeling the impact of the pandemic - and no longer having access to furlough funds or coronavirus grants to help them with their recovery - any new increases in tax could be catastrophic for them.
“The government's priority should be helping SMEs at this difficult time and ensuring that any new tax rises are directed at larger, stable companies that are capable of contributing, rather than smaller, more vulnerable ones.”
Moving onto specific policy changes that would benefit small businesses, Lavery called for a greater crackdown on late payment, simplification of the UK tax system, more statutory protections for self-employed workers, harsher penalties for tax evasion by multinational companies, additional financial aid for startups and enhanced support and advice in the post-Covid economy.
Moving onto specific policy changes that would benefit small businesses, Lavery’s Fantasy Budget submission called for:
- A greater crackdown on late payment
- Simplification of the UK tax system
- More statutory protections for self-employed workers
- Harsher penalties for tax evasion by multinational companies
- Additional financial aid for startups; and
- Enhanced support and advice in the post-Covid economy.
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Details for plastic packaging tax wrapped up
26 Oct, 15:00 - The government released more details of its incoming plastic packaging tax (PPT), Mark Taylor reported this afternoon.
A charge of £200 per metric tonne will be levied on packaging materials manufactured in, or imported into the UK, that contain less than 30% recycled plastic. PPT will cover plastic bags, single-use food containers and bioplastics including biodegradable, compostable and oxo-degradable plastics.
Records will need to be kept for all packaging, including those that contain 30% or more recycled material. The tax is expected to raise £670m for the treasury between 2022 and 2026 and will enter force on 1 April, 2022.
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Public sector pay freeze to end
26 Oct, 11:00 - Another day, another spending commitment… This time, Rishi Sunak turned his attention to public sector pay and announced an end the pay freeze that has been in place since April.
Repositioning his pandemic pay restraint policy as a “pause”, the Chancellor will gladden the hearts of around 2.6m public sector employees. The move fits into Boris Johnson’s broader policy drive to improve the productivity, skill levels and pay for all UK employees, so standby for other initiatives in those areas on Budget day.
Accouncing his change of heart, the Chancellor explained: “The economic impact and uncertainty of the virus meant we had to take the difficult decision to pause public sector pay.
“Along with our Plan for Jobs, this action helped us protect livelihoods at the height of the pandemic. And now, with the economy firmly back on track, it’s right that nurses, teachers and all the other public-sector workers who played their part during the pandemic see their wages rise.”
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26 Oct, 09:00 - Not everyone is so convinced by the Chancellor’s apparent largesse ahead of Budget Day. A Sussex-based microbiologist complained on Twitter this morning:
These are not budget ‘leaks’, they’re a deliberate trickled release of measures that may be construed as positive in the hope that people won’t look at the detail tomorrow where the bad news hides. Plus, it also undermines the parliamentary process #Budget2021
— Micro Pat (@micro_pat) October 26, 2021
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National minimum wage to go up to £9.50/hr
Oct 25, 17:00 - Yet another spending commitment popped out of the Treasury this afternoon with news that the national minimum wage (NMW) would increase from £8.91 to £9.50 an hour from 1 April 2022. The rate for workers under 23 will also go up to £9.18 an hour.
PracticeWeb’s James Martini broke the news on AccountingWEB in a broader piece running through the most likely Budget measures to show up on Wednesday afternoon.
The Martini backed the “tax lite” analysis put forward by the Financial Times, in part due to the threshold and allowance freezes announced in the March Budget that will peg many core rates and exemptions until the end of the 2025-26 tax year. “That will pull more people into the scope of paying tax over time,” he noted.
Elsewhere, the PracticeWeb tax editor speculated:
- Business rates reform could be delayed again, even though rising inflation has prompted more pleas for reform.
- Short odds on changes to capital gains tax, potentially aligning rates with income tax. It would certainly simplify things a bit, but provoke accusations of strangling the economic recovery.
- Aligning the self-employed national insurance contribution rates in line with employee rates. It’s a longshot, but after the 1.25% NIC increase for the health and social care levy, it’s not beyond the realms of possibility.
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Last ditch hospitality plea for extending 12.5% VAT rate
25 Oct, 13:00 - More than 200 hospitality industry leaders put their names to a letter backing UK Hospitality's #VATsEnough campaign to keep VAT at 12.5% for another six months.
This was one of the measure suggested in Neil Warren’s Fantasy Budget earlier this month that also won support from MHA partner Sue Rathmell. She commented that rather than bowing to Labour calls to reduce VAT on energy bills, a permanent VAT cut for the travel and hospitality sector would be better move than cutting VAT on energy bills.
“Lower VAT costs encourage people to holiday in their own country instead of going abroad, boosting income in the whole country,” she argued. “If the government were to maintain the 12.5% VAT rate indefinitely after 1 April 2022 instead of returning to the standard rate, the reinvigoration of the UK’s tourist centres, beach towns, tourist attractions, hotels and restaurants could continue. It would be a massive boost for the UK economy if we can encourage British people to continue to holiday at home... Many European countries already have a permanent reduced VAT rate for hotel accommodation, so this would further put the UK in line with peers.”
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FT predicts a low key approach to tax measures
25 Oct, 11:00 - With spashy headlines everywhere about the Chancellor’s spending plans (see below), the Financial Times highlighted that he has already introduced “some of the largest tax rises in the UK’s postwar history” to fund pandemic response measures.
Optimistic growth forecasts may give Sunak comfort that he’ll be able to fund his public spending commitments by the end of the parliament. As a result, “Sunak is keen not to announce many tax measures in Wednesday’s Budget, although there are due to be some tidying-up exercises,” the FT reported.
One issue as yet unresolved is the Chancellor’s March promise to equalise the tax treatment of the self employed and employed. “The self-employed have reason to be a little nervous about this Budget…” the FT warned.
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Sunak promises to pump cash into public services
24 Oct, 16:00 - “Strong investment in public services” will be at the heart of Wednesday’s Budget, Chancellor Rishi Sunak told the BBC’s Andrew Marr on Sunday morning.
“One of the elements of building a stronger economy is having strong public services, and you will see that next week - whether it's the NHS, which we've already taken steps to support significantly to recover from coronavirus - children, schools, skills, all of these things, policing and crime,” Sunak said on Marr’s BBC One interview programme.
Afterwards, the BBC tallied up spending plans already announced ahead of the Budget as follows:
- £7bn to support “levelling up” areas outside London
- £5bn for health-related research and development
- £3bn in funding promised to underpin a skills revolution
- A £1.4bn innovation fund and a “talent network” to attract foreign workings to UK businesses.
- Another £3.8bn promised for miscellaneous initiatives such as youth sports and maths coaching, a cultural hotspot fund and crime prevention measures.
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Bank surchange rate cut on the cards
19 Oct, 09:00 – Another tasty rumour, courtesy of the FT, which reported that the Chancellor is considering a cut in the surcharge on bank profits. Currently set at 8% on profits above £25m, the surchange would go down to 3% from April 2023.
With the basic corporation tax rate due to increase from 19% to 25% in April 2023, keeping the surcharge at its current rate would hit banks with an “uncompetitive” combined rate of 33% that would damage “one of the UK’s key exports”, according to the paper’s sources among the Budget scriptwriting team.
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Help with lower VAT rate on household energy?
17 Oct, 09:00 – The FT’s George Parker is making the pace again this year, with Fleet Street’s first serious policy punt appearing 10 days ahead of the big day – a potential 5% cut in VAT on domestic energy bills.
Reducing VAT on household energy bills takes advantage of the post-Brexit freedom to tinker with VAT rules that Neil Warren identified in his Fantasy Budget (summary below). Any move in this direction would pacify Tory backbenchers who have been calling on the Chancellor to respond to the looming cost of living crisis.
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It’s fantasy Budget time again, folks!
7 Oct, 13:00 – Throughout October, some of AccountingWEB’s best tax brains have been publishing their own Budget wishlists. After reviewing what they’re suggesting, tell us what would be in your Fantasy Budget by commenting below.
- Implementing the basis period proposals ahead of MTD ITSA was one change too many in such a short period.
- Starting the conversation about earlier payment of tax would be more straightforward.
- Consider a version of PAYE for the self employed.
- Increase the cash basis limit for income tax from £350,000; also consider increasing £1.35m VAT limit (supported by Neil Warren - see below).
- Increase the income tax threshold and NICs to £20,000 and impose a flat 13.25% rate of employee NICs on all remuneration over £20,000. The self-employed will pay NIC at this rate without any upper limit. A consultation paper will be published on merging income tax and employee’s national insurance contributions.
- Reduce the volume of tax legislation by a third before the end of the current Parliament. In doing so, they must also balance the books.
- Expand HMRC staff by 50% to focus on recovering tax that has not been accounted for correctly.
- Climate change measures: Simplify fuel duty with a flat levy of 25% of the cost of fuel. All revenues raised will be applied towards funding home insulation.
- Remove Principal Private Residence Relief (PPR) for stamp duty from March 2022 and double SDLT rates from the beginning of the next tax year.
- Increase universal credit by £2,000 per week.
- Delay the introduction of MTD for VAT for businesses below the £85,000 annual turnover threshold until April 2026.
- Extend the temporary 12.5% hospitality VAT rate for another six months to 30 September 2022.
- Double the threshold for the cash accounting scheme from £1.35m to £2.7m.
- Leaving the EU opened the door to simplification moves that diverge from European standards. Take advantage of this opportunity to consider abolishishing the partial. exemption de minimis thresholds. Also dispense with overcomplicated entertaining rules by only allowing businesses to claim VAT on entertaining its staff and no-one else.
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AccountingWEB’s Budget analysis will continue up to and beyond 27 October, and will include an in-depth discussion with Rebecca Benneyworth and Paul Aplin at 10am on Wednesday 1 December at the AccountingWEB Live Expo in Coventy. See you there!