Budget 2021 analysis: Five verdicts from the Cambridge region as Chancellor is accused of failing to address cost of living crisis
Chancellor Rishi Sunak promised major increases in public spending and tax cuts for businesses as he set out to create a “new economy” based on higher skills and wages.
But critics argued the Conservatives had failed to address the cost of living crisis, done little to address climate change and left the tax burden at its highest level since the early 1950s.
Mr Sunak made changes to the Universal Credit taper rate, announced a one-year rates cut for the retail, hospitality, and leisure sectors and froze fuel duty.
In a packed House of Commons, where many MPs failed to wear masks, he promising an extra £150billion in Whitehall spending and said: “Employment is up. Investment is growing. Public services are improving. The public finances are stabilising. And wages are rising.
“Today’s Budget delivers a stronger economy for the British people: stronger growth, with the UK recovering faster than our major competitors.”
Labour pointed out that said the government’s decision to end the £20 Universal Credit pandemic uplift had affected six million families.
Shadow chancellor Rachel Reeves said: “As he hits working people with the highest sustained tax burden in peacetime, he’s giving a tax cut to bankers who like to take short-haul flights while sipping Champagne.
“After taking £6billion out of the pockets of some of the poorest people in this country, he is expecting them to cheer today at being given £2billion to compensate.”
Here we gauge some of the reaction to the Chancellor’s announcements.
Budget won’t help with cost of living crisis, says Cambridge MP
Rishi Sunak claimed he was offering “help for working families with the cost of living” with Budget measures including a cut to the Universal Credit taper rate by eight per cent from no later than December 1, bringing it down from 63 per cent to 55 per cent. This is the reduction in Universal Credit payment for those working - and is, the Chancellor admitted, a “tax on work”.
But with inflation in September at 3.1 per cent and “likely to rise further” – the OBR expects CPI to average 4% over the next year - Cambridge’s Labour MP Daniel Zeichner argued that the Chancellor had not done enough to help with the cost of living.
He said: “In today’s Budget, the Chancellor should have been helping people with the cost of living crisis – we can all see prices going up everywhere. For people losing £20 a week in Universal Credit, it is already a hard winter ahead, and for others, most people’s wages aren’t keeping up with inflation. So that’s the test from what I’ve seen so far, lots of talk – but let’s see the small print.”
‘Betrayal of a generation’ - Liberal Democrats appalled that Chancellor spent more ‘cutting price of prosecco than on children’s futures’
Liberal Democrat Cllr Ian Sollom, the district councillor for Harston and Comberton, who stood in South Cambridgeshire in the last Parliamentary elections, said: “Rishi Sunak’s Budget shows the Conservatives are woefully out of touch.
“Many people who work hard and play by the rules are facing a cost of living crisis and with this budget the Chancellor offered little support. Tax hikes, benefit cuts and nothing at all on skyrocketing energy bills shows the Conservatives just don’t get the struggles people are facing in their everyday lives.
“Worst of all are the pathetic sums to help our children recover from the pandemic. When the Chancellor rejected Sir Kevan Collins’ £15billion catch up program in favour of a package less than a tenth of that, parents were told to wait to see more funding in this budget. All he could add today was a miserable £1 per day per pupil, and had the gall to boast that spending per pupil would return to 2010 levels by the middle of the decade.
“A decade and a half without growth in per pupil spending is shocking enough on its own. When considering all the classroom time that has been missed in the last 18 months, this spending represents a betrayal of a generation.
“You can’t build a strong economy without investing in younger generations and allowing them to fulfil their potential.”
Referencing the reduction on taxes on sparkling wines such as Champagne and prosecco – which the Chancellor said were “no longer the preserve of wealthy elites” – to the same level as still wines, ending an “irrational” 28 per cent duty premium, Cllr Sollom added: “The Chancellor spent more today on cutting the price of a prosecco than saving our children's futures. That tells you everything you need to know about the government's priorities.”
Help for retail, hospitality and leisure sectors welcomed
Ian Sandison, CEO of Cambridge BID, was pleased to see the Chancellor announce a new 50 per cent business rates discount for a year for the retail, hospitality, and leisure sectors, with eligible businesses able to claim a discount on their bills of up to a maximum of £110,000.
He told the Cambridge Independent: “I am delighted the Chancellor has listened to business organisations like British BIDs and announced this discount for the retail, hospitality and leisure sectors.
“Businesses on the high street are facing many cost pressures including wage increases, supply chain increases and rising energy costs so this will go some way to alleviate this.
“The business rates system still needs reform and it is disappointing that this seems to have been cancelled. Whilst we await to see the detail I am also pleased with the additional focus on apprenticeships that the retail, hospitality and leisure sectors need to help them attract new people.”
The Chancellor also announced a series of reforms to alcohol taxes from February 2023 – including a five per cent cut in duty on draught products to help support pubs.
Business leaders back moves on rates and skills, but warn it won’t unlock investment
The Chancellor promised a reform of business rates to make the system “fairer and timelier” with revaluations carried out more frequently - now every three years.
Other reforms to corporate taxes included slashing the surcharge on bank profits from eight per cent to three per cent.
Tony Danker, CBI director-general, said: “Today, the Chancellor has shown a genuine willingness to listen to business with measures that will get firms innovating and help the economy to grow. It takes several positive steps forward, but isn’t bold enough to deliver the high investment, high productivity economy the government seeks.
“On Business Rates, the Chancellor made real strides in making the system more palatable for businesses in the shorter term. More frequent valuations, wider reliefs and improving the incentives for firms to decarbonise their premises is what firms have been calling for. But the hard truth is that wholesale reform to unlock investment was rejected today. The government missed the opportunity to truly reform a business rates system that diminishes Britain’s high streets and factories.
“The government’s commitment to innovation will be a central cog to the UK’s prospects to leading in the industries of the future. This will be essential to be globally competitive so the government must stick to these targets in the coming years.
“Meanwhile, businesses will welcome the new skills bootcamps. This agile approach must now be the watchword when it comes to revolutionising the skills landscape, including for apprenticeships.
“This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit post-Covid world. Businesses remain in a high tax, low productivity economy with concerns about inflation. But the Budget will have a positive impact across the economy and makes several changes that will be welcomed by UK businesses.”
Mr Sunak promised a new, lower rate of air passenger duty on domestic flights within the UK, to aid nine million passengers and help regional airports.
One area that could boost investment came in changes to the annual investment allowance.
Carolyn Norfolk, indirect tax lead at EY in the East of England and Midlands, said: “In a Budget that was light on tax incentives for capital investment, there was some welcome news in the form of a further temporary increase in the limit of the annual investment allowance (AIA) from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from January 1, 2022 to March 31, 2023. The AIA, a 100 per cent capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit, has been a feature of the UK legislation since 2016. Its predecessors were nicknamed the yo-yo tax relief, as Chancellors were renowned for increasing and decreasing it to stimulate investment.
“Today the Chancellor has extended the period of the ‘temporary’ relief through to the start of the new 25% rate of corporation tax. Given that much of the expenditure in this period may also be covered by the ‘super-deduction’ announced in the spring, the cost of the extension is far less than in normal times. Nevertheless, it will be valuable to those purchasing second hand equipment, something excluded from the Chancellor’s incentive in the spring.”
£3bn skills injection will aid high value sectors in Cambridge region - but won’t fully address widening skills gap, warns expert
Carolyn Norfolk, indirect tax lead at EY in the East of England and Midlands, said: “A focus on skills, with an injection of £3bn to increase the provision of post-16 education and create opportunities for people wishing to enter high value sectors such as AI, cybersecurity and nuclear, is welcome. However, the focus should also be on raising the bar for other areas of the economy to reduce the widening skills gap.
“The East of England is known for having high-level skills in sectors such as agri-tech, healthcare innovation and science, yet logistics also plays a major part in the region’s economy. An extension to the Peterborough Gateway was announced earlier this week, which could create an additional 5,500 jobs and generated £119mn for the local economy, subject to planning permission being granted. Jobs being created could include managerial, technical, professional, skilled trades, driving, stock handling and administrative support. Increased accessibility and availability of training is critical if the region is to achieve its economic growth targets.
“In this Budget, the Chancellor has recognised the need to invest in future talent in evolving sectors, in addition to more traditional sectors – due to the genuine concern about a widening skills gap across the UK and its potential impact on its attractiveness to investors and businesses. The focus on creating opportunities for traineeships and apprenticeships in vocational areas is critical, as is ensuring opportunities are feasible to all sizes of businesses, with apprenticeship uptake encouraged, supporting industries across the East of England.”