Rishi Sunak has already announced a mammoth rise in taxes – but will that £12billion-a-year social care package be enough or is there more to come in the 2021 spending review? We take a look
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In the past month, a £20 a week Universal Credit lifeline has been revoked, furlough has been shut down and an energy crisis has unravelled – with household bills set to rise by hundreds next year.
At the same time, the Chancellor has pushed through the biggest rise in personal taxes in two decades – a 1.25% National Insurance hike that will flip into a social care levy next April to raise £12billion more for care and the NHS.
Sunak says the economy is booming – with 1.2million job vacancies and the number of people in work now back to pre-Covid levels – but households are facing a cost of living crisis and inflation could top 4% by Christmas.
The Tories have already broken their promise to raise taxes – meaning there is no telling how far the Chancellor will go this month when he delivers his latest Autumn Budget to the nation.
The income tax personal allowance has already been frozen at £12,570 and the higher rate threshold at £50,270 from next April until 2026.
With the national debt now at its highest since 1963, we take a look at what could be announced on October 27.
What are you hoping the Chancellor will announce? Let us know in the comments below
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Image:
Alex Lentati/LNP)
Universal Credit
The Chancellor is being pressed to increase benefits by more than £700million a year to cushion the blow of withdrawing the £20-a-week Universal Credit uplift. Any possibility of this will be revealed in the Budget.
It comes as charities and campaigners have warned this month’s cut will trigger a record high in families using food banks this winter.
The Chancellor ended the £5billion a year Covid support on October 6.
Richard Lane, StepChange director of external affairs, said: “The recent creation of a £500m Household Support Fund will help people to deal with one-off emergencies. But when faced with today’s cut, along with the end of furlough, rocketing energy prices and rising inflation, millions will face a daily battle just to get by.
“We agree with the Chancellor when he says that everyone should be able to makes ends meet, but this will be immeasurably more difficult for households with £1,040 less to live on. The Government has the opportunity to set this right by assessing the impact of the cut in the coming weeks and reversing it before the damage becomes too deep.”
Alcohol duty
The freeze on alcohol duty and a temporary cut in VAT for hospitality and tourism businesses from 20% to 5% during Covid ended this month.
With much of the hospitality industry at full capacity, it is unlikely that this Covid cut will be extended, meaning pubs and restaurants will revert to the higher tax. That means those who have passed this relief onto consumers will also most likely put their prices back up.
Minimum wage
The Treasury is also expected to confirm a 5.7% rise in the minimum wage for those aged 23 and over to £9.42 an hour.
This 5.7% increase would equate to £928 a year before tax for people working 35 hour weeks.
The National Living Wage is separate from the real Living Wage, calculated by the Living Wage Foundation (LWF) based on the cost of living.
Raising the National Living Wage to £9.42 would bring it very close to the LWF’s current recommendation of £9.50 an hour.
There is no word yet on whether Boris Johnson will increase the government’s Minimum Wage for under 23s.
State pension
The government has already confirmed that the state pension ‘triple lock’ will be suspended for a year due to a skewed increase in average earnings during Covid.
The triple lock guarantees that the state pension will increase every year by inflation, average wage earnings growth, or 2.5% (whichever is highest).
Next year it will rise by the highest out of 2.5% and September’s inflation rate – which is due next week.
Cladding tax
Earlier this year the government introduced a £3.5billion fund to pay for cladding removal or remediation in buildings over 18 metres, or six storeys, high in England.
There are now rumours that Rishi Sunak has plans for a residential property developer tax to pay for this removal of flammable cladding from high-rise buildings.
The tax will be paid by housebuilders with profits of more than £25million. It is expected to raise at least £2billion over the next decade.
What about climate change?
The Budget will take place shortly before the international climate summit COP26.
In the March 2021 Budget, the Chancellor announced NS&I green savings bonds, although according to NS&I’s website these won’t be available for a few months yet.
The Autumn Budget is also expected to unveil a replacement for the botched Green Homes Grant to make homes more eco-friendly.
There could also be developments on the plan to replace gas boilers under the Clean Heats Grant – with households to be offered grants to swap them for more sustainable alternatives ahead of a proposed 2035 ban.
Energy price reform
Soaring energy prices are the biggest concern facing most households this winter – and are rapidly becoming one of the biggest problems the Government needs to tackle too.
With many families facing the choice between affording food or heating after wholesale gas prices rose 250%, the Government may offer a lifeline to those households.
They could extend the Warm Home Discount scheme, to allow more people to benefit, or increase it from its current £140.
The winter fuel payment could also be increased for pensioners who will be among the hardest hit this winter. The amount has been frozen for years, but there is precedent as the Government previously introduced a temporary uplift of £50 in 2009-11, although this was under Labour.
Of course, any such payouts would come at a cost – estimated at £2billion for the Treasury.
Council tax
All eyes are on how much funding the Government will give local councils in the next 12 months.
Local councils are struggling to foot the bill for some of the new social care plans announced by the Government earlier this year.
Put simply, if councils don’t get the funding from the Government, they’ll have to go to the public and hike council tax.
The IFS has already predicted a potential increase of around £240 to average bills in the next few years if more central Government funding isn’t given, and even its best-case scenario sees an extra £160 added to bills in the next few years.
Personal allowance
The chancellor has already frozen the income tax personal allowance at £12,570 and the higher rate threshold at £50,270 from next April until 2026.
Inheritance tax
The Chancellor dodged calls to increase inheritance tax in the March budget but tax experts say it could make the cut this time around.
Changing inheritance rules would boost the Treasury’s coffers without changing working tax rates.
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