THE CHANCELLOR has set out his plans for economic recovery after the pandemic in his Budget today.

Rishi Sunak said his spending plans were evidence of the ‘indisputable fiscal benefit’ of being part of the United Kingdom.

He said the Scottish Government would receive an extra £4.6bn a year as a result of the measures, claiming devolved governments would receive the “largest block grants since 1998”, with Wales receiving £2.5bn a year and Northern Ireland an extra £1.6bn.

As part of the UK Government’s plans to ‘level up’ the country, Scottish projects will receive around £170m, Mr Sunak said, including in Aberdeen.

He told MPs that the Office for Budget Responsibility (OBR) had forecast a faster economic recovery, with growth expected to be 6.5 per cent this year rather than 4% previously predicted.

The Chancellor 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.

“Stronger public finances, with our debt under control. Stronger employment, with fewer people out of work and more people in work. Growth up, jobs up, and debt down: Let there be no doubt – our plan is working.”

 

The OBR said the economy was expected to return to its pre-Covid level at the turn of the year and scaled down its assumption of the long-term scarring effect of Covid-19 on the economy from 3% to 2%.

The OBR forecasts lower growth in 2022 than previously expected – down from 7.3% to 6% – partly because of the stronger performance in 2021, while in 2023 it is expected to be 2.1%, in 2024 1.3% and 1.6% in 2025.

Borrowing will also be lower than previously forecast, falling from 7.9% of gross domestic product (GDP) – a measure of the size of the economy – to 3.3% next year, then 2.4%, 1.7%, 1.7% and 1.5% in the following years.

The better-than-expected public finances allowed Mr Sunak to make a series of major promises on public spending.

“Today’s Budget increases total departmental spending over this Parliament by £150 billion,” he said.

“That’s the largest increase this century, with spending growing by 3.8% a year in real terms.”

It would mean a real-terms rise in spending in every single government department, he told MPs.

Mr Sunak also committed to reverse the controversial cut in the aid budget, which was return to its legally-mandated target of 0.7% of national income in 2024/25.

In an attempt to 'connect' the country, the Chancellor said that return flights travelling within the UK would face lower air passenger duty rates.

Mr Sunak said: "I can announce that flights between England, Scotland, Wales and Northern Ireland will, from April 2023, be subject to a new lower rate of air passenger duty. 

"This will help cut the cost of living for nine million passengers. It brings people together across the United Kingdom." 

The planned rise to fuel duty has been scrapped, the Chancellor confirmed, alongside a simplification of alcohol taxes.

Mr Sunak said scrapping the rise to fuel will save car drivers £1900 a year, and will slash the cost of a tank of fuel by £15. 

On alcohol, he said the new taxing system would be based on the strength of the drink and the planned increase in duty on spirits, wine, cider and beer will be cancelled.

He explained that a 'draught relief' will apply a lower rate of tax on draught beer and cider cutting the tax by 5% on drinks served from draught containers over 40 litres and bringing the price of a pint down by 3p.

Mr Sunak added: "That’s the biggest cut to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years.

“It’s a long-term investment in British pubs of £100m a year. And a permanent cut in the cost of a pint by 3p.”

Finishing his statement, the Chancellor announced that he will amend the Universal Credit allowance, reducing the amount people lose for every £1 they earn by 8%. It means that those on the benefit will lost 55p for every £1 they earn, instead of the current 63p. 

He said the plans would come in no later than December 1, rather than waiting until next year.