Budget 2021: Public Spending Increase and Extra Cash for Welsh Government

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Rishi Sunak promised extra cash for Welsh public services and a boost for low-paid workers on universal credit and those earning the minimum wage in his autumn budget yesterday.

The Chancellor also said the Welsh Government’s budgets from Westminster would increase by an average of £2.5bn a year. Budget documents show the cash received by Welsh Government will increase to £17.7bn by 2023, £18bn in 2024  £18.2bn in 2025.

The Chancellor took the opportunity to shelve a proposed increase in fuel duty as the UK continues to experience the highest petrol prices in almost a decade.

And for those wanting to drown their sorrows, changes to alcohol duty will see cheaper sparkling wine and draught beer. A planned increase in duty on spirits, wine, cider and beer was also cancelled.

For workers over 23, the national minimum wage increases to £9.50 an hour. With widespread concerns over the recent £20 cut to Universal Credit, changes are to be introduced to let working claimants keep more of their benefit.

There is also good news for regional UK airports. Flights between England, Scotland, Wales and Northern Ireland will be subject to a lower rate of Air Passenger Duty (APD) from 2023. On the eve of COP26 the move is likely to disappoint those who would prefer to discourage internal air travel as the UK promotes its ambitions to reduce carbon emissions.

The Chancellor confirmed £121m in ‘levelling up’ funding for ten projects in Wales:

  • Pontcysyllte Aqueduct and Canal World Heritage Site – £13.3m
  • Redevelopment of Brecon’s Theatr Brycheiniog Arts Centre – £6.9m
  • Montgomery Canal restoration, Powys – £15.4m
  • 20km Tywi Valley Path – £16.7m
  • Aberystwyth Old College and Marina –
  • £10.8m Muni Arts Centre, Pontypridd – £5.3m
  • Heart of Pembrokeshire Rediscovering –  £17.7m
  • Carmarthen and Pembroke Hwbs – £19.9m
  • The Porth Transport Hub – £3.5m
  • Upgrading 1.3km of the A4119 road into a dual carriageway -£11.4m

The Treasury also pledged to bring forward £105m for the Cardiff City Region Deal to fast-track its infrastructure development projects.

Commenting on the UK Budget Statement today, Ben Francis, FSB Wales Policy Chair, said:

“The budget was a bit of a mixed bag for small businesses in Wales.

“Plans to reform alcohol taxes and freeze fuel duty will be welcomed by some in business, and it’s positive the Chancellor has heeded FSB’s call to introduce investment reliefs for businesses adopting green technologies.

“However, the Chancellor could have reduced payroll taxes or taken the edge off non-domestic energy bills. An extension of the employment allowance would help alleviate the impact on businesses of the upcoming raising of National Insurance contributions.

“Local and independent firms struggling under the weight of covid debt and spiralling utility costs won’t have heard much on how this Budget will address their immediate concerns.”

Lloyd Powell, head of ACCA Wales, said:

‘As we build back the Welsh economy after the pandemic, we welcome the additional funding for Wales announced today to support business, skills development, people and communities, including the funding for the British Business Bank to establish a £130 million fund in Wales, helping Welsh businesses get the funding they need.  Confirmation that total funding will, at a minimum, match the size of EU Funds in Wales each year through the Shared Prosperity Fund is also welcomed. A joined-up approach between the UK and Welsh governments is needed to ensure effective and efficient delivery of programmes to support Wales and the Welsh economy, with a greater focus needed to support SMEs’ access to green investments and business planning.’

SMEs

We are concerned about pressures building on small businesses, which are now faced with repaying tax on the £20 billion plus worth of grants and support they received to keep them afloat during the early stages of the pandemic until April 2021. This huge tax demand will hit companies which are just regaining profitability and adds to squeezes due to increased tax on dividends and employers’ National Insurance for the Health and Social Care Levy.’

TAX

‘We are disappointed that today’s budget did not take the opportunity to support the tourism and entertainment sectors further by keeping their VAT rate at 12.5% beyond next April and for the remainder of this parliament. A lower rate of VAT would help ensure people keep coming through the doors regardless of locality or size of the business.

‘Historically, the UK has had one of the highest VAT rates for these sectors across Europe and we have shared our fear with the Treasury that returning to a rate of 20% within months has the potential to inflict huge damage on an already struggling sector and make many businesses unsustainable.

‘While the Chancellor has announced cuts in business rates for the retail, hospitality and leisure sectors in England, we await the Welsh Government’s draft budget later this year for details regarding further business rates support in Wales.’

CLIMATE CRISIS

‘We welcome the Chancellor’s statements about government and business investment in green technology and job creation, but we haven’t heard any details about enabling the broader skills needed to make this a reality. We need to invest in skills, reskilling and continued learning to ensure the government achieves maximum impact and value from green investment. Finance teams can help their organisations to plan, measure and report on their efforts to reach net-zero.’

SKILLS

‘We would like to hear more from the Chancellor about greater investment in skills development. It’s more important than ever that the UK has a strong pipeline of professional and ethical business advisors, as we seek to boost productivity and take advantage of new opportunities.’

Paul Slevin, President of Chambers Wales, said:

“SMEs are the lifeblood of Welsh business and play a vital role in the growth of our economy. This multi-million-pound commitment to specifically support small and medium sized businesses in Wales is a welcome investment to enable future growth, particularly after the challenges of operating throughout the pandemic.

“We understand that the fund will be delivered through the British Business Bank and it is essential that we now receive clarity on eligibility criteria, funding channels and how to access support to ensure that as many SMEs as possible can benefit from this funding opportunity.

“We look forward to speaking with industry leaders over the coming weeks to better understand the implications of the budget for their business and how we can assist them to unlock their growth potential.”

Richard Ellis, senior partner of Newport accountants Ellis Lloyd Jones commented:

“In many ways, this was one of the most boring Budgets of recent years.

“Chancellor Rishi Sunak’s statement to MPs lacked any real drama, largely because the Government had spent the previous week releasing the key details to the press – much to the annoyance of the Speaker of the House.

“As with all Budgets, this was something of a curate’s egg – good and bad in parts depending on your political persuasion, your income level, and the section of the economy in which you work or do business.

“The increase in the National Living Wage to £9.50 an hour from next April will be welcomed by many – and a salary increase for the poorest-paid is never a bad thing – but there are question marks over whether the increase will be enough to keep those on low wages above the increase in the overall cost of living.

Victoria Vyvyan, Vice President of the Country Land & Business Association (CLA) which represents 28,000 rural businesses, farmers and land managers across England and Wales, said:

“Today’s Budget shows government has no plan to create prosperity in rural areas.  All too often, when government talks about the countryside they do so in the context of keeping it the same.  But there is no ambition to show what the countryside could be – a vibrant part of the economy that creates jobs and encourages entrepreneurship, all the while building strong communities in which people can afford to live. We urge the Welsh Government not to make the same mistake, as it makes its own spending plans and that it does more to enhance the value of the rural economy, which is so critical for green growth.

“We welcome the news that Welsh SMEs are to receive £130 million from the British Business Bank’s (BBB) regional funds. Again we urge the Welsh Government to ensure the rural economy benefits – including many farms which have had to diversify from their core business to create vitally-needed additional income-streams.”

“The rural economy is 18% less productive than the national average, largely due to poor infrastructure, poor skills provision and an outdated planning regime.  As a result, underemployment and deprivation take root. However, if government brought its ‘levelling up’ agenda to the countryside and focused on reducing the productivity gap, up to £43bn could be added to the economy with the creation of hundreds of thousands of good jobs.  Today was a missed opportunity.

“The announcement to build more homes on brownfield sites might make sense, but given less than 10% of available sites are in rural areas it will do nothing to ease the rural housing crisis.  Nobody wants to concrete over the countryside, least of all us, but instead of treating rural communities as museums government should support small scale developments – adding small numbers of homes to a large number of villages, helping to provide good housing for local people whilst also boosting the local economy.”

Derek Cribb, CEO of IPSE (the Association of Independent Professionals and the Self-Employed), said:

“After the severe and disproportionate financial impact of the pandemic on the self-employed sector, this Budget provided an opportunity for the Chancellor to show his support for those who work for themselves. While the commitments he made today on investment in infrastructure, innovation and skills, are welcome, there is far too little in the Budget that would directly support the self-employed.

“We are grateful there were no new tax rises, but disappointed the Chancellor didn’t take the opportunity to further simplify and reduce working taxes. Instead, we had a promise that tax would come down by the end of the Parliament but no indication of exactly how.

“IPSE has also called for investment in training and skills but the announcement today, though welcome, does not go far enough. The funding should be made more flexible so the self-employed can choose which training is right for their businesses.

“Overall, this Budget does nothing to reassure the UK’s 4.3 million self-employed businesses, who are reeling from a series of setbacks, from gaps in support to disastrous IR35 reforms.