Budget 2021 predictions
The Chancellor, Rishi Sunak, will reveal his Budget and Autumn spending review to the Commons on 27 October 2021, The government spending and financial strategy. He is expected to unveil a number of measures to balance the books after spending billions during the COVID pandemic.
In his March Budget, Mr Sunak announced the minimum wage would increase to £8.91 in April for over 23s.
The age threshold was lowered from 25 and over to 23 and over.
Under the new rules, those aged between 21 to 22 now receive £8.36 and workers aged between 18 to 20 get £6.56 – up from £6.45.
Under 18s get £4.62 – a rise from £4.55 – and apprentices receive £4.30, up from £4.15.
Fresh changes to the national minimum wage could be announced next week, as the government has come under pressure to help employees - especially as younger workers have been some of the worst hit by the economic downturn.
In his keynote speech to delegates at the Conservative Party Conference earlier this month, Boris Johnson said his goal is to move “towards a high wage, high skill, high productivity economy that the people of this country need and deserve,” in a hint the minimum wage is set to rise.
Campaigning group Youth Fight for Jobs have called for an immediate increase to £12 per hour, while Labour passed a motion at its party conference last month to raise the minimum wage to £15 per hour.
Reports have indicated Mr Sunak could increase the minimum wage to £9.42 per hour, Which would represent an increase of more than 5% from its current rate of £8.91 an hour, the third-highest annual rise since the financial crash.
When probed on it by Sky News earlier this month, Mr. Johnson said: “You should wait and see what Rishi does, we will do everything we can to look after people in the months ahead.”
The Chancellor is widely expected to end a one-year freeze on public sector pay, introduced in order to control the deficit at a time when the economy was shrinking thanks to the impact of the virus and lockdowns.
The pay freeze affected over 1.3 million workers, including civil servants, teachers, police, firefighters, the armed forces and council staff.
Frontline NHS staff were exempt from the pay freeze and received a 3% pay rise back dated to April 2021.
Taxes are highly unlikely to be cut in the Budget, due to the Government borrowing £299bn, the highest figure since records began in 1946, in the first year of the pandemic – April 2020 to April 2021.
Speaking at the Conservative Party Conference on 4 October 2021, the Chancellor said he wanted to cut taxes, but it may take some time before he is able to do so.
The Treasury has already frozen income tax thresholds and announced a 1.25% National Insurance increase to fund a health and social care levy, breaking Tory manifesto promises not to raise taxes.
Corporation tax will also rise from 19% to 25% from April 2023, but Mr Sunak will be under pressure to do more to put the economy on a more sustainable footing.
He is expected to hike capital gains tax, which the Chancellor already froze until 2026 in the last Budget, with talks of rates being aligned more closely with income tax rates.
Inheritance tax rates are not expected to change.
The Treasury has yet to publish its review into plans for net zero emissions by 2050, which was due to be released in Spring 2021.
Mr Sunak has come under pressure to share the review and outlined plans to help the UK transition to a zero-carbon economy.
The UK will host the UN COP26 climate change summit in Glasgow later this month and the pressure is on the Government to show leadership.
The UK has targets to cut CO2 emissions by 78% by 2035 and reach net zero by 2050.
Mr Sunak is also expected to announce the Heating and Boiler strategy, which will be aimed at making electricity cheaper and gas more expensive over the course of the next 15 years.
The Government will ban the installation of new gas boilers after 2035, with consumers being hand in subsidies of between £4,000 and £7,000 for electric heat pumps.
Surcharges would also be added on polluting gas rather than electricity, which will push up gas bills by £159 on average.
It is not yet clear how much help Britons will get with retrofitting, which could cost as much as £12,000.
Mr Sunak is also tipped to make the governments electric car grants less generous, in order to save money.
The Chancellor is said to be pushing to reduce the value of the current “plug-in” grant which is worth up to £2,500.
The Chancellor May lower the threshold at which people start repaying their student loans, which could save the Treasury about £2bn a year.
Currently English and Welsh students who enrolled at university after 2012 pay 9% of everything they earn above £27,295 per year.
They repay the same 9% until the loan is fully repaid or until 30 years after graduating.
But ministers have proposed cutting the threshold to as low as £23,000, and graduates would have 40 years as opposed to 30, to repay their debt.
Critics have said it would cause a drastic change to graduates incomes, with Money Saving Expert Martin Lewis Warning the lowest earning graduates would end up paying more, and for longer.
He said students would end up paying about £400 more a year.
Mr Sunak wants to keep Government borrowing to a minimum, as the UK government deficit (or net borrowing) rose to £304 bn in the financial year ending March 2021, the equivalent to 14.5% of GDP.
But the Chancellor will likely have to come under pressure from the Prime Minister to fund recent new pledges, such as Mr Johnson's ambition to “level-up”.
Mr Johnson may also publish the “levelling up” White Paper Which explains how the Government's flagship policy will be implemented and sets specific metrics against which it can be judged by the public and experts.
this is likely to come with a large price tag that has to be met by the Treasury, for example Northern Powerhouse Rail alone is projected to cost a minimum of £30 bn.