‘Optimistic’ Sunak gets Budget firepower thanks to UK growth upgrade

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Rishi Sunak today vowed a Budget to foster a ‘stronger economy’ after Covid – having been handed firepower with growth forecasts set to be nearly doubled.

The Chancellor told the Cabinet that the government’s Levelling Up agenda is a ‘golden thread’ running through the package.  

After briefing ministers, Mr Sunak carried out the traditional photocall in Downing Street before he headed to the House of Commons for his speech. 

He has a bit more money to deploy due to the strong bounceback from the pandemic – with the independent Office for Budget Responsibility expected to say UK plc will grow by 7 per cent this year instead of the 4 per cent it pencilled in in March.

The ferocity of the global recovery has sparked materials and labour shortages, causing inflation to surge and posing other serious headaches for the government.      

But as a result borrowing so far this year is well over £30billion below previous estimates, and the long-term damage to the British economy could be less than originally feared.

Rumours are swirling that Mr Sunak will deploy some of the headroom to ease the pressures on families and businesses from raging inflation and supply chain chaos.

He has already declared that the minimum wage will be hiked, and the public sector pay freeze is being axed. 

There is speculation of a boost to universal credit when he unveils the full fiscal package this afternoon, while alcohol duty could be cut to help pubs.  

However, the Chancellor has also stressed the need to balance the books after the £400billion cost of the pandemic, with Tories raising alarm about the massive £2.2trillion debt and the looming threat of inflation driving up interest rates.

Mr Sunak told the Cabinet the Budget ‘prepares for a new economy post-Covid’ and will ‘take the opportunities leaving the EU has afforded us’ to deliver ‘substantive reform of our tax system’. 

In his speech, Mr Sunak will hail his Budget as ushering in a ‘new economy’ after the pandemic as he confirms billions of pounds for the NHS and wage rises for millions of workers.

He is expected to say: ‘Today’s Budget begins the work of 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. That is the stronger economy of the future.’

Labour’s response is in danger of descending into shambles after it emerged at the last moment that Keir Starmer has tested positive for coronavirus. Shadow chancellor Rachel Reeves will be answering the statement for the Opposition instead, while shadow business secretary Ed Miliband filled in at PMQs.     

The easing of lockdown restrictions and the vaccine rollout mean the economy is in better shape than was expected at the time of the last financial statement in March.

Growth forecasts for this year will be revised from 4 per cent potentially to as high as 7.5 per cent.

The OBR watchdog’s prediction for the ‘scarring’ from the pandemic – the permanent loss to the economy – could also be lowered. 

That will give Mr Sunak more leeway to pump money into public services as he sets out spending plans for Whitehall departments for three years.

However, the biggest-ticket item – the £12billion a year NHS and social care boost funded by an eye-watering national insurance hike – has already been revealed last month. 

In a further positive bit of news for Mr Sunak, there are claims today that the chances of ‘Plan B’ Covid restrictions have fallen dramatically after the surge in cases levelled off.   

On a big day in Westminster:

Ministers unveiled a new funding model to encourage more British investment in nuclear power stations – squeezing China out but risking higher home energy bills;Commons Speaker Sir Lindsay Hoyle complained Mr Sunak was treating MPs in a ‘discourteous manner’ by pre-briefing some of his Budget announcements;Union bosses demanded all public-sector workers should be given inflation-busting pay rises;It was warned that a new inflation forecast could reduce household incomes by £1,000 next year in real terms;The Budget is set to include a freeze on fuel duty – but not a cut on VAT on energy bills;MPs have been urged to wear masks during the Chancellor’s Budget speech by a World Health Organisation Covid expert.

The Treasury has pledged green investment and policies to take advantage of post-Brexit freedoms and has touted nearly £7billion of new funding for local transport.

Mr Sunak will also set out new fiscal rules, which are expected to include a commitment to stop borrowing to fund day-to-day spending within three years.

It is thought he will also require government debt, running at about 100 per cent of gross domestic product, to start falling by 2025.

Office for National Statistics figures showed last week government borrowing was far lower than forecast in the first half of the fiscal year. 

The budget deficit was £108.1billion between April and September, almost 30 per cent below predictions. However, Mr Sunak will strike a note of caution about how servicing the debt could become much dearer if prices rise.

In March, he pointed out that a 1 per cent rise in interest rates and inflation would cost us over £25billion, adding: ‘Over the medium term, we cannot allow debt to keep rising, and, given how high our debt now is, we need to pay close attention to affordability.’ 

Ministers have been under huge pressure to reverse the decision to end the temporary £20-a-week uplift to Universal Credit, which was introduced during the pandemic.

Although the government has ruled out bowing to those demands – despite Andy Burnham suggesting this morning they would – many expect the Chancellor to make the benefit more generous. 

That could mean cutting the taper rate – the proportion of handouts people lose once they are over their minimum work allowance – to 60p in the pound from 63p.  

Former cabinet minister Robert Jenrick, sent out to bat for the government in interviews this morning, said the Chancellor has been thinking carefully about the pressures on families.

But he insisted that while there are ‘reasons for optimism’, Mr Sunak still has to contend with rising inflation and a global supply chain shortage.

‘I think the OBR forecasts are going to show the economy has grown substantially therefore we are borrowing much less as a country, and that gives the Chancellor more room to invest in the future of public services like the NHS,’ Mr Jenrick told Sky News.

‘But I think he is also going to have to think carefully about people on the most modest incomes and how he can help them in what is undoubtedly still going to be a difficult period when we are seeing inflation rising, higher energy prices and so on.’

Labour leader Sir Keir Starmer tweeted: ‘The Budget must take the pressure off working people.

‘With costs growing and inflation rising, Labour would cut VAT on domestic energy bills immediately for 6 months.

‘Unlike the Tories, we wouldn’t hike taxes on working people and we’d ensure online giants pay their fair share.’ 

Shadow Chancellor Rachel Reeves urged Mr Sunak to ‘take the pressure off working people’.

She added: ‘Labour would ease the burden on households, cutting VAT on domestic energy bills immediately for six months, and we would not raise taxes on working people and British businesses while online giants get away without paying their fair share.’

Tory MP Sir John Redwood said: ‘When do we get the plans to run down the one off pandemic spending? Where is the plan to run railway services for the new pattern of working, to drive down the huge losses? Government needs to spend wisely.’ 

In March, the OBR warned that by 2025-6 the economy will still be 3 per cent smaller than it would have been if the pandemic never happened.

Unemployment was expected to peak at 6.5 per cent, but that was down from the bloodcurdling 11.9 per cent predicted in July last year. 

National debt was set to hit an eye-watering £2.747trillion in 2023-4, equivalent to a peak of 109.7 per cent of GDP. 

By 2026-7 the central forecast is that it will be over £2.8trillion and still bigger than the economy’s annual output. 

The OBR estimated that by the end of its forecast period the government’s deficit will be almost eradicated, at £900million, finally stopping debt rising. 

Commons Speaker Sir Lindsay Hoyle stepped up his war of words with the Government last night as he tore into pre-briefing of Budget policy announcements. 

Mr Sunak’s approach has prompted repeated rebukes from Sir Lindsay, who says the House should be informed first. 

The Speaker said Mr Sunak was treating Parliament in a ‘discourteous manner’ as he vowed to do everything in his power to ensure ministers answer MPs’ questions. 

Meanwhile, MPs on both sides of the chamber expressed their anger at the Government’s communications strategy, accusing ministers of ‘treating parliamentary democracy with utter contempt’. 

It is the latest stand-off between the Speaker and ministers. In June Boris Johnson agreed to make major Covid decisions to Parliament as well as to the nation on television after he was given a blunt telling off.

Sir Lindsay granted a second urgent question in two days to force Treasury ministers to appear in the Commons to answer questions on the forthcoming fiscal event.

He said the ministerial code states important announcements of Government policy should be made to Parliament first when it is in session.   

Sir Lindsay told the Commons: ‘I was disappointed to see more stories in the media today with apparently very well-briefed information about what will be in tomorrow’s Budget.’

He accused the Government of treating the Commons in a ‘discourteous manner’, adding: ‘This House will not be taken for granted, it’s not right for everybody to be briefed, it’s not more important to go on the news in the morning, it’s more important to come here.’

Mr Clarke defended the Government as he argued part of the objective in ‘trailing specific aspects of the Budget in advance is to help communicate to the public what we’re doing with their hard-earned money’.  

Chancellor confirms lifting of public sector pay freeze

Rishi Sunak today confirmed that a 12-month public sector pay freeze will end, paving the way for more than five million workers to receive a pay rise next year. 

The Chancellor froze public sector pay back in November last year amid public spending pressures caused by the pandemic. 

The freeze covered the period from April 2021 to March 2022.

But the Treasury said on Monday evening that the ‘pause’ will end from April next year. 

Mr Sunak said the move was possible because the economy is ‘firmly back on track’ after the lifting of coronavirus restrictions. 

However, there is no guarantee the increase will be higher than the rising cost of living, meaning workers could still feel worse off.

Union bosses have demanded a pay rise of at least 3.1 per cent – the current rate of inflation. 

Mr Sunak has not set out how much wages will be boosted by, with the rises set to be announced next year following recommendations from independent pay review bodies. 

Downing Street has also refused to be drawn, insisting the ‘process is for independent pay review bodies to look at’. 

National minimum wage to rise from £8.91 to £9.50

The national minimum wage will increase by 6.6 per cent next year, boosting the pay of an estimated two million workers. 

The wage baseline will go from the current rate of £8.91 an hour to £9.50, applying to all over-23s. 

The 59p an hour rise will take effect on April 1 and will mean a full-time worker on the minimum wage will see their pay packet grow by more than £1,000 a year.  

Rishi Sunak said the wage hike ‘keeps us on track to meet our target to end low pay by the end of this Parliament’.  

The minimum wage for younger workers will also increase, with people aged 21 to 22 seeing their pay go from £8.36 to £9.18. Pay for apprentices will increase from £4.30 to £4.81.     

Mr Sunak said: ‘This is a Government that is on the side of working people. This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament.’

The Government has set a target of the minimum wage being two-thirds of average earnings by 2024. 

Labour described the increase as ‘underwhelming’ and said ‘much of’ the extra cash will be ‘swallowed up’ by Government tax rises. 

Chancellor allocates almost £7billion to pay for ‘levelling up’ regional transport links

Rishi Sunak will pump billions of pounds into regional transport links in a bid to deliver on the Government’s ‘levelling up’ agenda.

Nearly £7billion will be given to areas such as Greater Manchester, the West Midlands and South Yorkshire for projects ranging from tram improvements to introducing London-style improvements in infrastructure, fares and services.

The investment will be seen as a win for Greater Manchester mayor Andy Burnham, who has been heavily lobbying the Government to hand over the cash for his region to launch a London-style transport system.

Labour’s Mr Burnham had called for £1billion and put pressure on ministers during the Tory Party conference in Manchester earlier this month.

The Treasury has confirmed Greater Manchester will be given just over £1billion. 

The announcement is also being touted as a vote of confidence in the devolution agenda as all those awarded cash are areas with metro mayors. 

Elsewhere, there will be £830million given to West Yorkshire, £570million in South Yorkshire, £1billion in the West Midlands, £310million in Tees Valley, £540million in the West of England and £710million for the Liverpool City Region. 

Some £5.7billion will be transport settlements for the regions, while £1.2billion of new funding will go towards transforming bus services to deliver London-style journey times, fares and number of services. 

NHS handed an extra £6billion to buy new equipment and clear Covid backlog

Rishi Sunak today confirmed the NHS will receive £6billion in new funding to buy equipment, improve its IT systems and tackle the Covid backlog. 

The £5.9billion is in addition to the £12billion funding boost delivered through a hike in National Insurance.

The Government said the extra cash will help to provide millions more checks, scans and procedures for non-emergency patients.  

The capital funding will aim to deliver approximately 30 per cent more elective activity by 2024-25 compared to pre-pandemic levels. 

In an effort to address the Covid backlog of people waiting for checks, tests and scans, and help get waiting lists down, £2.3billion of the funding package will be used to transform diagnostic services.

The Treasury said there will be at least 100 ‘one-stop-shop’ community diagnostic centres across England, including 44 which have already been announced.

These centres are expected to help clear most existing test backlogs caused by the pandemic, including for CT, MRI and ultrasound scans, by the end of the parliament. 

The settlement to tackle backlogs also includes £1.5billion for increased bed capacity, equipment and new surgical hubs to tackle waiting times for elective surgeries.

Each hub will be equipped with four or five surgical theatres designated for critical elective surgeries.

A total of £2.1billion of the £5.9billion total will be invested in technology and data in a bid to improve efficiency and security within the NHS.  

Health research receives £5billion funding boost  

The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas like genome sequencing and tackling health inequalities.

Part of the package will include money for genome technology to allow doctors to detect more than 200 conditions in babies, compared with existing tests which can only identify nine.

Some £95million of the funding will go towards the Office for Life Sciences to help with cutting-edge innovations to help treat cancer, obesity and mental ill health. 

The money will also fund a project to tackle healthcare inequalities by increasing representation of minority groups in genomics research programmes. 

The ‘Diverse Data’ project will aim to recruit at least 15 per cent of people from ethnic minority backgrounds to take part in research programmes.

Rishi Sunak said: ‘The past 18 months has shown us how important innovative R&D is in delivering new, life-saving treatments and improving the efficiency of our healthcare system.

‘The UK is already home to some of the best minds in healthcare and life sciences, and I’m committed to seeing this sector flourish as we level up opportunity across the country and recover from the pandemic.’ 

Cash injection of £3billion to launch ‘skills revolution’ 

Rishi Sunak has pledged £3billion to improve post-16 education and to help more adults gain new skills later in life.       

The cash will be used to quadruple the number of ‘skills boot camps’ in areas like artificial intelligence, cybersecurity and nuclear. 

Some £1.6billion will provide up to 100,000 16 to 19-year-olds studying for T-levels – technical-based qualifications – with additional classroom hours, while 24,000 traineeships will also be created. 

Mr Sunak said: ‘Our future economic success depends not just on the education we give to our children but the lifelong learning we offer to adults.

‘This £3billion skills revolution builds on our Plan for Jobs and will spread opportunity across the UK by transforming post-16 education – giving people the skills they need to earn more and get on in life.’

A total of £830million will be allocated to help revitalise existing colleges in England. 

Meanwhile, the National Skills Fund will be boosted with a total investment of £550million to make sure all adults can access education. 

Government targets brownfield housing boom with £1.8billion funding boost

Brownfield sites covering the equivalent of 2,000 football pitches could be turned into plots for new homes through a £1.8billion Budget funding boost. 

The Government hopes the cash will see hundreds of thousands of homes built on regenerated land across the country. 

England’s planning system will also undergo an overhaul including a raft of digitisation.  

Some £300million of grant funding will be handed to metro mayors and councils to unlock smaller brownfield sites for housing.

Meanwhile, a new £9million levelling up parks fund will give cash to local authorities to spruce up 100 neglected urban spaces into pocket parks. 

Rishi Sunak said: ‘We are investing in better quality, safer, greener and more affordable homes to create thriving places where people want to live.

‘One of my favourite pastimes is to go for walks in the park with my family, and I want to make sure everyone has green space on their doorstep to enjoy too.

‘Transforming our unloved and neglected urban spaces will help protect our cherished countryside and green spaces, while improving the physical and mental health of our communities.’ 

Cultural hotspots to be handed £850million for upgrades and restoration

Museums and galleries in England will receive a Budget boost of £850million to ‘breathe life’ back into cultural hotspots.

The money will be used to restore and upgrade some of the country’s most popular institutions such as London’s V&A museum, Tate Liverpool and the Imperial War Museum in Duxford. 

Other establishments set to benefit from the three-year funding include York’s National Railway Museum and the British Library site at Boston Spa in Yorkshire.

A total of £125million will be invested towards helping build a new state of the art scientific research centre in Oxfordshire, part of the Natural History Museum.

The centre, which is set to open in 2026, will house 27 million specimens, over a third of the museum’s total collection, and will make them digitally accessible to researchers around the world.

The Government hopes it will help strengthen the UK’s position in tackling global challenges including climate change, biodiversity loss and emerging diseases.

In addition, over £75million will be spent to help 110 regional museums and libraries improve their buildings and level-up their digital facilities, the Treasury said.

Funding will also be given to the flagship High Streets Heritage Action Zone programme to help continue its mission to revive town centres across England. 

Border Force boats to be replaced with new cutters

Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain’s borders.

The current fleet, which is 20 years old, will be retired and 11 new vessels will come into service to help tackle organised crime and illegal migration at a cost of £74million.

The announcement also includes £628million ‘to modernise and digitalise the border’, with proposals including a US-style Electronic Travel Authorisation for tourists wishing to come to the UK.

Electronic authorisations will launch in 2023 and be fully in place two years later and, like the American system, will allow authorities to decide if people should be allowed to travel to the UK prior to their arrival.

Rishi Sunak said: ‘Protecting our borders and making it easier for us all to travel to and from our great nation is at the heart of our ambitions as a government.’   

Rishi Sunak pledges £2.6billion to help children with special educational needs

The Chancellor has allocated £2.6billion to help back more than 30,000 new places for pupils to support their learning in both mainstream and special educational needs schools.

It will also be used to improve the suitability and accessibility of existing buildings and go towards new special and alternative provision free schools to help drive up standards in special education.

Mr Sunak said: ‘I want every child to have the best possible start in life and to fulfil their potential.

‘That’s why we’re taking action to fund tens of thousands of new places for students with special needs and disabilities, improving the lives of so many of the nation’s most vulnerable children.’

The move comes as there is rising demand for specialist support because the school age population is expected to be around 10 per cent higher in 2025 than it was in 2010.

The Treasury says the measure will almost triple the amount of this year’s capital funding for the most disadvantaged young people through specialised educational support.

No time for flip-flopping, Chancellor! 

Rishi Sunak teamed a pair of socks with £95 ‘sliders’ as he put the final touches on his Budget.

In glossy photos released by the Treasury, the Chancellor could be seen sporting the American-style shoes, made by fashion label Palm Angels.

‘Sliders’ are similar to flip flops but without a central toe post, and popular with sports stars.

Another photo showed a can of Sprite and a Twix bar next to his red box – after the Chancellor said he would eat the sugary snacks as his ‘pre-game routine’ pre-Budget.

But the Chancellor, who is teetotal, will not enjoy a sharpener like some of his predecessors as he delivers his speech in the Commons today.

Last year Mr Sunak raised eyebrows after pre-Budget photos showed a £180 travel mug on his desk.

The ‘Ember’ smart mug, a Christmas present from his wife, keeps hot drinks such as tea or coffee at the exact same temperature for up to three hours and comes with its own charging coaster.

Labour’s child poverty spokesman Wes Streeting said last night: ‘I don’t care if the Chancellor chooses to spend £95 of his money on a pair of flip-flops, but I do care that he’s so out of touch that he doesn’t understand the impact of taking £20 a week off low-paid workers and what it means for 200,000 kids pushed into poverty by his policy.’