On the 27th October, Rishi Sunak, the Chancellor of the Exchequer, unveiled his Budget in the House of Commons. The budget outlines the current government’s plans for taxation and decisions around spending on health, schools, police, and other public services. After the extravagant amounts of debt that have built up from the Pandemic, many were curious to see how this would impact this year’s budget announcement. 

 

Since the 2010 Conservative and Liberal Democrat coalition, the Conservatives have maintained an almost ‘Thatcherite’ low taxation and low spending approach. The austerity programme initiated by Cameron and Osbourne’s government, after the financial crisis of 2008, led to severe cuts in public spending (education and welfare specifically). Between 2010 and 2013, the government reduced public spending by £14.3 billion compared with 2009-10. This government had a fiscal conservative philosophy that believed in tight control of government money. Austerity policies were not just adopted by the UK, governments across the world turned to austerity policies to reduce budget deficits by reducing labour costs, privatisation and reconfiguring public services. 

 

As a result of the unforeseen situation of the Coronavirus pandemic, the government has been borrowing and spending substantial amounts of money. In the first year of the pandemic, from April 2020 to 2021, the government borrowed a shocking £299 billion, the highest figure since records began in 1946. This record-breaking debt leaves many asking the question: how will the government repay the money it has borrowed?

 

Budget measures that Sunak has announced include government departments receiving a rise in spending (totalling £150 billion over the course of this Parliament). The Levelling up Fund will mean that £1.7 billion will be invested in ‘levelling up’ local areas across the UK: promising widespread prosperity, cohesion between central and local governments and puts councils at the forefront of improving opportunities for people in local areas. A problem facing the current government are the NHS backlogs: 5.7 million people were on waiting lists at the end of August, which is the highest figure since records began in August 2007. Rishi Sunak has pledged £6 billion to help tackle these backlogs and improve NHS technology. Banks will receive a tax cut from 8% to 3%, which will cost the Treasury more than £1 billion a year by 2026; despite the tax cuts to bank surcharges, ONS points out that the tax burden from this budget is the highest its even been since 1945 Another announcement from the budget, is the increase in minimum wage, one might think this would help boost the economy, but other changes elsewhere mean only the very lowest paid will benefit. 

 

Rishi Sunak’s budget is far from his predecessors fiscal conservative approach of austerity. Sunak has stressed that he intends to bring government finances back on track by 2024. The latest statistics have shown GDP growth rates are expected to be strong (around 7.2% this year and 5.5% next year). There are still many questions surrounding our future economy, especially since we don’t know what the long-term impacts of Brexit will be.  

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Written by Izzy, Y12