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27 October 2021

Briefing: UK Government Autumn 2021 budget

Overview

The UK’s economic recovery from COVID-19 faces numerous challenges, including global supply chain issues and an increase in energy prices. As a result, the Office for Budget responsibility has predicted inflation will rise from 3.1% in September 2021 to 4% over the next year. We know many households on low incomes face a challenging winter ahead with some already feeling the additional financial strain from the removal of the £20 Universal Credit uplift. These are some of the key issues that underpinned the Chancellor’s budget statement on 27 October 2021.

The Welsh Government has responsibility for spending decisions for public services in Wales, including health, social care and housing. However the UK Government’s budget has both direct and indirect implications for Wales, and this briefing outlines key announcements relevant to Wales.

Overall picture

  • Every Whitehall department will receive a “real terms rise in overall spending” amounting to £150 billion over this Parliament. This increase in spending has resulted in an increase in Welsh Government funding by £2.5 billion per year (at the time of writing this figure was reported by the Chancellor in Parliament and press releases, but has been queried by media after analysis of budget documents)

  • Priorities for this additional funding will be determined by the Welsh Government, who are due to present their draft budget for 2022/23 to the Senedd on 20 December

  • The UK Government has set out its spending plans until 2024/25. For the first time, the Welsh Government has some medium-term certainty about its budgets over a number of years. On 20 December the Welsh Government will publish its Budget outlining its own spending plans over that period

  • CHC will be calling on the Welsh Government to provide longer-term certainty on investment in key capital and revenue funding streams in their upcoming budget as we called for in our Home! Manifesto. This includes calls made on Social Housing Grant and other capital streams such as ICF, Housing Support Grant, and social care funding.

Employment & welfare

  • An increase in national living wage by 6.6% to £9.50 per hour by April 2022

  • A reduction in the taper rate for Universal Credit from 63p in every pound earned to 55p in every pound.

Whilst these announcements are welcome for those in work, these commitments only partially offset the Chancellor’s previous announcements to increase National Insurance by 1.25% next April and the recent cut to the £20 per week uplift to Universal Credit. Early JRF analysis is that “for those in work, the change to the taper rate and work allowance, alongside the National Living Wage increase, are very positive steps, allowing low-paid workers to keep more of what they earn … But the reality is that millions of people who are unable to work or looking for work will not benefit from these changes”.

Wales’ Finance Minister, Rebecca Evans MS has called for further steps to be taken to target support to lower income families struggling as a result of the cut to Universal Credit, the future increase in National Insurance contributions, and spiralling energy prices.

Decarbonisation

Despite COP26 in Glasgow being less than a week away, the budget offered very little detail on resources to tackle the climate crisis. Last week the government committed an additional £800 million to the Social Housing decarbonisation fund, and there were no further announcements funding for the decarbonisation of housing in this budget.

We know that in discussions with their UK Government counterparts, the Welsh Government called for prioritised funding in tackling climate change as one of their main priorities. It remains to be seen how the Welsh Government uses the spending choices available to them to invest in decarbonisation when they share their own draft budget in December.

UK Shared prosperity fund

The UK Shared prosperity fund is the replacement scheme for EU structural funds. As part of the first £1.7 billion, Wales will receive £120 million for 10 “levelling-up” projects across Wales. By way of comparison, Wales used to receive around £375 million per year in EU structural funds.

In response, Rebecca Evans MS, Finance Minister, stated that “there are clear gaps in funding where the UK Government should be investing in Wales and it has chosen not to. Arrangements for replacing EU Structural Funds remain unclear but what we do know is it falls well short of the £375 million we were receiving – these are funds that support skills, businesses and decarbonisation.”

Housing announcements (England only)

Housing is a devolved issue, and so housing announcements made in this budget are for England only. Announcements largely reiterated announcements made previously for the sector in England. They included:

  • £24 billion multi-year housing settlement

  • 1.8 billion brownfield fund

  • £11.5 billion investment in affordable homes, which has been announced previously and is underway

  • a 4% tax on developer profits over £25 million to help pay for the £5 billion previously announced to remove unsafe cladding

  • £640 million for rough sleeping and homelessness

Other announcements for Wales

  • Establishing a new trade and investment hub in Cardiff to grow trade for Wales

  • Accelerating £105m of funding for the Cardiff City Region Deal.

For further information, please contact Bryony Haynes, Policy and External Affairs Officer, at [email protected]