Sunak offers tax breaks to get more ships flying the Red Ensign

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  • Rishi Sunak
    Rishi Sunak
    Chancellor of the Exchequer of the United Kingdom (born 1980)
Rishi Sunak Chancellor Budget 2021 - Leon Neal/Getty Images
Rishi Sunak Chancellor Budget 2021 - Leon Neal/Getty Images

Rishi Sunak will offer tax breaks to ships that fly the Union Jack as a tribute to Britain’s “proud maritime history”.

In his Budget speech this afternoon, the Chancellor said the Government would shake off previous rules that allowed ships flying any EU flag to receive preferential treatment, which he said “didn’t make sense for an independent nation”.

Instead, a new tonnage tax regime will reward vessels that fly the UK’s merchant shipping flag, known as the Red Ensign. Mr Sunak said: “That is entirely fitting for a country with such a proud maritime history as ours.”

It came amid a raft of spending plans, including a one-year reduction in business rates for retail and hospitality, cuts to alcohol taxes and an overhaul of air travel taxes.

05:29 PM

Wrap up

Time for us to wrap up – I hope you’re enjoyed our coverage today. Don’t forgot that you can read all our coverage of the Budget and its consequences on our our Business page. Have a good evening.

05:21 PM

…but not everyone is cheering

The Treasury’s detail Budget documents include the revelation – hard to swallow for some smaller brewers – that ‘draught relief’ will only apply on kegs larger than 40 litres.

That is bad news for several smaller companies, which typically produce more diminutive kegs.

And, as City A.M.’s Andy Silvester points out, that probably doesn’t include the ones Mr Sunak and the PM have been pictured with today.

05:07 PM

Pub toast ‘draught relief’

Pints - DAN KITWOOD/POOL/AFP via Getty Images
Pints - DAN KITWOOD/POOL/AFP via Getty Images

Pubs are pretty happy with the alcohol duty reforms, with their shares shooting up today.

My colleague Hannah Boland has more:

The 5pc “draught relief” announced by Rishi Sunak sent shares in pub chains Wetherspoons, Marston's and Mitchells & Butlers higher.

The reforms were cheered by industry figures, with Chris Jowsey, the chief executive of Admiral, one of Britain’s largest community pub groups, calling changes a “fantastic result” for the sector. About three quarters of sales for community pubs come from draught.

Nick Mackenzie, boss of pub and brewer Greene King, said the reforms came as a “much needed vote of confidence in the great British pub as we face into an uncertain winter, labour disruption and rising costs”.

04:58 PM

Niesr: Pay rise ‘not enough’ for poorest families

Larissa Marioni, an economist at the National Institute of Economic and Social Research, is among those saying the proposed increase in the National Living Wage won’t be enough to stop many families feeling the pinch in the coming months:

Despite sounding generous, the proposed change may not be enough to support low-income families. The pay rise is likely to be consumed by soaring energy bills and the continuous increase in the cost of living. Not to mention the already announced increase in government taxes, starting with a National Insurance rise, which is also set to take effect in April next year.

As a reminder, IFS director Paul Johnson earlier called the looming stagnation of living standards “actually awful” (see 2:58pm post). There had already been backlash to these proposals because the wage boost was briefed so far in advance, but criticism remains widespread.

04:51 PM

OBR gives freeports short shrift

Freeports were the (underwhelming) “one more thing” feature of Mr Sunak’s last Budget, but didn’t feature heavily today.

As a reminder, a freeport is a “designated area within a country where the prevailing rules around customs procedures and duties are suspended” – and Britain wants to create a bunch of them.

That hasn’t stopped the OBR putting the boot into the low-tax, low-regulation import zones – which have a pretty shoddy record of delivering economic gains.

The watchdog says:

[E]xperience of enterprise zones around the world points to little difference in performance between cities with zones and those without, with stronger determinants of performance being existing infrastructure and transportation links…

International evidence also suggests that enterprise zones tend to be more effective in developing countries, where tariff and non-tariff barriers to trade tend to be higher, making the potential gains greater… there is little scope [for the UK] to benefit from tariff inversion.

[G]iven historical and international evidence, we have assumed that the main effect of the freeports will be to alter the location rather than the volume of economic activity, so the costs have been estimated on the basis of activity being displaced from elsewhere. To the extent that activity is genuinely additional, it will be revealed in GDP and receipts data over time, though given the small scale relative to the whole economy, such effects would probably be difficult to discern even in retrospect.

Ouch. In short, the OBR does not think freeports will prove to be post-Brexit cash cows – although there’s an argument that intentional displacement of economic activity could serve some levelling up ends.

04:43 PM

Spending shifts as Britain goes grey

Another interesting chart from the OBR’s report has been highlighted by CapX’s Robert Colville:

The shift of spending into pension welfare is fascinating, and it’s like a good chunk of that health and care spending also captures the cost of looking after Britain’s ageing population. Meanwhile, see how defence spending has plunged in relative terms!

04:38 PM

Are more tax reforms coming?

The tax nerds of Twitter (there’s a fair few) have given today’s announcement of alcohol duties reforms a pretty warm reception. This chart from the Institute for Fiscal Studies captures the changes neatly:

Marissa Thomas, head of tax at PwC, wonders whether this might set to ball rolling for further streamlining:

The reform in alcohol tax, while it may seem trivial, is a positive sign of intent when it comes to simplifying what is currently an unnecessarily complicated tax system. Simplification could be one of the keys to driving economic growth and making the UK a competitive place to do business.

04:28 PM

Business leaders gives their Budget verdicts

Our reporters have been speaking to some of Britain’s most prominent business leaders to gauge their reaction to today’s fiscal announcement. Here are some of the highlights:

Amanda Blanc, Aviva chief executive

Amanda Blanc
Amanda Blanc

Given the insurance industry’s role in investing in a sustainable future for the UK, I particularly welcome today’s announcements to boost UK economic growth. The £7bn cut to business rates in particular looks well targeted and will be roundly welcomed.

In the future we would like the Government to go further by asking UK financial services regulators to support economic growth. This would help us be even more effective in the way we can support and invest in our economy, while at the same time aiming for a reliable return for savers and pensioners.

Steve Murrells, Co-Op chief executive

I welcome the £1.6bn of funding to roll out T-levels for 16 to 19-year-olds, but this should not be at the expense of Btec qualifications. I very much welcome the announcements on its holiday activities and food programme but I am also disappointed that the Chancellor couldn’t respond to the National Food Strategy ask of broadening free school meal access over the next three years. Ensuring that all our children don’t go hungry each day is a means to building a fairer and more equal society for the future.

Sir Martin Sorrell, S4 Capital

Sir Martin Sorrell - REUTERS/Eric Gaillard
Sir Martin Sorrell - REUTERS/Eric Gaillard

From what had been already leaked before the Budget speech, this was always going to be a politically astute “interim” budget…

Barring any black swans, the UK and global economy will continue to strengthen this year and next, despite tapering, higher interest rates and more than transitory inflation, continuing to be driven by the impact of the huge financial and monetary pandemic-driven stimulus and low real interest rates. The year 2023 will mark the time when we have to pay for all this. Our politically astute Prime Minister and Chancellor will trigger an early election.

04:12 PM

Further scarring downgrades likely

One crucial part of the OBR’s latest report was the downgrade to scarring – the watchdog now reckons the blow to potential output by 2025 compared with its pre-pandemic projection will be just 2pc, down from 3pc.

That’s a huge adjustment in cash terms, freeing up billions of pounds extra for the Chancellor.

Analysts said deeper damage, which it predicted could have resulted in an outcome hit of 5pc or 6pc, no longer looks likely – but warned of potential

“While considerable uncertainties remain, we regard the balance of risks to have shifted,” they wrote.

The OBR is among the more pessimistic forecasters. The Bank of England’s predictions say scarring will be of just 1pc.

The revised figures suggest Covid’s long-term effect on GDP will be far smaller than that of the financial crisis.

The OBR will keep the projections under review. Further downwards revisions could unlock tens of billions of pounds for Rishi Sunak if he wants to make tax cuts ahead of the next election.

Neil Shearing from Capital Economics said future downgrades mean Mr Sunak may end up with up to £30bn in extra headroom by the 2024/25 fiscal year.

03:55 PM

Handing over

Talking of heading for a pint, that's all from me today – thanks for following along during a busy day of announcements! My colleague Louis Ashworth will take over from here with more reaction and analysis.

03:35 PM

Boris Johnson and Rishi Sunak head for a pint

After a busy afternoon in the Commons, Boris Johnson and Rishi Sunak have headed down to Bermondsey for a photo opp at a brewery.

The visit marks a major package of alcohol tax reforms in today's Budget, which will see the price of beer and wine slashed.

Fortuitously, it's also a chance for the Prime Minister to let his hair down. For the teetotal Chancellor, however, it's all work.

Boris Johnson Rishi Sunak Budget brewery - Dan Kitwood/Getty Images
Boris Johnson Rishi Sunak Budget brewery - Dan Kitwood/Getty Images

03:24 PM

Expert reaction: Britain is natural home for global maritime business

Ben Murray, chief executive of Maritime UK, says the shipping reforms will help maintain Britain's global status as a maritime hub.

Britain is the natural home for global maritime business, and the government’s reforms to the Tonnage Tax regime for global shipping companies will help ensure it stays that way.

Alongside the Chancellor’s commitment to invest in maritime decarbonisation and skills, this will attract new maritime businesses to the UK, bringing economic benefits from city to coast.

But the international landscape is competitive, and we urge ministers to keep up this momentum to boost our standing on the global stage. We will be working closely with government on the details of these reforms, to ensure the world knows UK maritime is open for business.

03:13 PM

Sunak: My goal is to reduce taxes

It's worth reiterating one of the main messages of Rishi Sunak's Budget – that although taxes are continuing to rise, his ultimate goal is to cut down the size of the state.

The Chancellor acknowledged that taxes as a proportion of GDP are now at their highest level in 70 years, adding: "I don’t like it, but I cannot apologise for it – it’s the result of the unprecedented crisis we faced and the extraordinary action we took in response."

But in a clear nod to Conservative values – and perhaps to appease some dissatisfaction among backbenchers – he pledged to cut taxes by the end of the current Parliament.

He said: "By the end of this Parliament, I want taxes to be going down not up. I want this to be a society that rewards energy, ingenuity and inventiveness. A society that rewards work."

Our columnist Ben Wright gives his verdict: This could easily have been a Labour Budget

02:44 PM

More expert reaction: Signs of weaknesses ahead

Scott Corfe, research director at the Social Market Foundation, says:

Showing a continued departure from the economic doctrine of much of the past decade, the Chancellor has focused on spending increases over tax cuts as the tool for boosting the economy. We think this is a step in the right direction, and welcome today’s commitments to invest more in skills, infrastructure and programmes to support families.

However, even this spending-heavy Budget may not be enough to address the UK’s economic challenges and behind the Chancellor’s optimistic rhetoric are signs of continued weakness ahead.

The Office for Budget Responsibility expects employee pay to be broadly stagnant over the next three years, after adjusting for inflation. And economic growth beyond the coronavirus bounce-back remains below pre-financial crisis norms.

The Government’s narrative about Britain moving to a high wage economy may come back to haunt ministers.

02:42 PM

Expert reaction: Chancellor has performed a difficult balancing act

Debapratim De, senior economist at Deloitte, says:

Today’s Budget signals the government’s commitment to set public finances on a sustainable footing while funding a bigger post-pandemic state. Previously announced tax rises and the OBR’s upgrades to growth forecasts have enabled the Chancellor to perform this difficult balancing act.

But, his current plans leave little headroom against the newly announced fiscal targets, which could be easily eliminated by future downgrades to growth forecasts.

With the super deduction and a raft of additional incentives announced today, the Budget underscores the government’s intentions to encourage business investment, in a bid to boost productivity, as the economy emerges from the deepest downturn in more than a century.

02:30 PM

What's in the Budget for tech startups?

It's been another upbeat budget for Britain's thriving tech ecosystem, with a number of changes around research and development, visas and regional financing.

Dom Hallas, executive director of Coadec, describes it as a "very positive showing". He runs you through the key details here:

02:22 PM

West End boss: Business rates relief 'falls well short'

business rates West End Budget 2021 - Jamie Lorriman
business rates West End Budget 2021 - Jamie Lorriman

There's more criticism of the business rates changes (or lack thereof) coming in now, this time from the group that represents businesses in London's West End.

Jace Tyrrell, chief executive of New West End Company, says:

It's encouraging to see the Chancellor finally act upon the need to reform the business rates system. Cancelling the inflation-linked rise to the multiplier may ensure that rates won’t go up this year, but they are still too high.

A one-year 50pc discount for the retail and hospitality sectors will help some struggling high street businesses, but not all. By capping the 50pc high street discount at £110,000, the benefit means little to city centre businesses. For a store in London’s West End, it will result in less than a 1pc cut in their business rates bills for just one year.

Reducing the time between revaluations to three years is welcome, as is the short term relief for investment in improvements and sustainability, but this falls far short of a fundamental review.

This simply doesn't meet the Government's manifesto commitment to reduce the burden of business rates on business. We hope that this is not the extent of the fundamental review.

02:10 PM

Stocks to buy after the Budget

Looking to invest after the Budget? From Wetherspoons to Jet2 there are a string of UK companies that set to gain from Rishi Sunak's reforms.

The Telegraph's Money team have put together their recommendations:

02:06 PM

Expert reaction: Business rates reform 'effectively ruled out'

While the year-long reduction in business rates will be a relief for retail and hospitality, Phil Vernon at PwC says the Government has passed on the opportunity for more significant change.

The Chancellor’s announcement that the business rates system will remain an important part of Local Authority funding and the final report into changes to the Business Rates system, means that substantial changes have been effectively ruled out.

This will frustrate many ratepayers, who have been calling for reform for some time. The commitment to switch to more frequent revaluations every three years have been highlighted as a priority area for reform, but the switch will come with new reporting obligations on ratepayers to allow this to be delivered.

More welcome will be the cancellation of the planned 3pc increase in April 2022 which would have added a significant extra tax burden as business seeks to recover from the effects of the pandemic.

Furthermore, the introduction of a new 50pc business rates relief for retail, leisure and hospitality will be welcomed in the short term but with the relief capped at £110k per business this will not represent a significant tax cut to many larger retailers.

02:02 PM

Fuel duty held as petrol prices surge

It may have been widely expected, but the scrapping of plans to increase fuel duty will still come as a relief to motorists already facing eye-watering pump prices.

Will Kirkman writes:

The Chancellor has frozen fuel duty at 57.95p per litre for the 12th year in a row.

The levy was due to rise to 60.79p per litre, which would have added 3.5p per litre to the pump price after VAT is applied on top. A full tank of fuel would have cost £2 more, the RAC has calculated.

On Sunday, the price of petrol hit 142.94p, a record high, higher than the 142.48p level in April 2012. Fuel duty earned the Government roughly £28bn last year.

01:58 PM

IFS: Disposable income 'virtually stagnant'

There's a bit of an antidote to all the optimism from the Institute for Fiscal Studies (IFS), which warns that while growth forecasts have improved, real disposable income is set to lag behind over the next five years.

Paul Johnson, IFS director, describes the levels of real income as "virtually stagnant", adding: "This is actually awful."

01:53 PM

Housebuilders warn cladding charge will hit investment

housebuilders cladding - Rui Vieira/PA Wire
housebuilders cladding - Rui Vieira/PA Wire

Housebuilders have warned that a new cladding charge will limit investment and exacerbate the housing shortage.

Rishi Sunak announced a 4pc levy on developers to help pay for the removal of unsafe cladding on high-rise buildings following the Grenfell disaster.

A Home Builders Federation spokesman said: “The companies targeted by this tax built only a small fraction of affected buildings with many more the responsibility of overseas developers and long dissolved companies. Other sectors and responsible parties will not be subject to any similar super taxes.

“This new tax should be seen in the context of a raft of other new levies, taxes and regulatory costs on home building that various Whitehall departments are introducing, the cumulative impact of which could threaten site viability and stifle investment in new developments and employment.

“Many of these new costs have sound logic but are being brought forward without an appreciation of the whole picture.”

Barclays analysts said developers would have to pay about £200m a year through the levy, with a "modest impact" anticipated.

01:49 PM

EY: More of a 'Blue Peter Budget'

Chris Sanger, EY's head of tax policy, says the Chancellor's announcement had a "distinct 'Blue Peter' feel to them, having been prepared well in advance of the big day".

He argues the biggest tax changes came from the Health and Social Care Levy – announced a month ago – as well as the rise in corporation tax and freezing of income tax thresholds announced in the Spring Budget.

With these three changes, the Chancellor had indeed raised more in the last six months than many Chancellors have in any year. With many of the taxes yet to be felt by taxpayers, it is perhaps not surprising that he chose to stick with the pre-prepared announcements rather than add to the burden that is yet to be experienced.

Changes to encourage investment, such as through a further temporary extension to the Annual investment Allowance, may sweeten the pill but the corporation tax rate increase is likely to dominate the pallet of many businesses for the next few years.

The cut in the bank corporation tax surcharge from 8pc (meaning a rate of 27pc) to 3pc (meaning a rate of 28pc once the base rate of corporation tax increases) may be seen as a cut by some, but merely means that the penalty imposed on banks will be relatively less, even as the tax rate rises.

However, the Chancellor has sought to change the tide for the future, with a consultation on the re-domiciliation of businesses. Coming at a time of change in the international tax regime, this effort to support companies seeking to relocate to the UK may prove to be a real boon for UK investment and help the Chancellor reinforce his message that Britain remains open for business.

01:43 PM

How are booze taxes changing?

There was a lot of focus on alcohol duties in the Budget, as the Chancellor promised sweeping reforms to a tax system that dates back to 1643, when levies were placed on booze to help fund the Civil War.

But what will it mean when you're next in your local? Here's a useful guide:

01:39 PM

2m fewer job losses as unemployment forecast slashed

More from those OBR upgrades now. At the height of the pandemic in July last year, unemployment was expected to peak at 12pc. The latest forecasts suggest it'll be a (relatively) much lower peak of 5.2pc.

Announcing the new numbers this afternoon, the Chancellor said this would mean 2m fewer people out of work than previously feared.

01:34 PM

Sterling claws back losses as growth forecasts lifted

Sterling has recovered much of its losses from earlier in the day after the fiscal watchdog upgraded its forecasts for economic growth.

The OBR said the economy was likely to grow by 6.5pc in 2021, faster than a forecast of 4.0pc made in March during the third Covid lockdown.

The pound recovered from its one-and-a-half-week low against the dollar hit earlier this morning, though it's still trading down. It's now down 0.3pc at $1.3725, compared to an earlier fall of 0.4pc.

Against the euro, the pound fell 0.3pc at 84.57 pence.

01:25 PM

CBI: Government 'missed opportunity' on business rates

Tony Danker, CBI Director-General, says the Budget will have a positive impact, but does not go far enough to set up the UK economy for the post-Covid era.

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 [...]

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.

01:21 PM

Westfield owner: Lack of Amazon tax is 'another blow'

Westfield Budget 2021 Amazon tax - ISABEL INFANTES / AFP
Westfield Budget 2021 Amazon tax - ISABEL INFANTES / AFP

There was no update in the Budget on the controversial online sales tax, with the Government admitting it was still in listening mode, writes Laura Onita.

If one is eventually introduced, however, some of the funds raised will be used to cut business rates, the documents showed.

Scott Parsons, the UK boss of shopping centre owner Westfield, says: “The decision to continue to avoid imposing any kind of tax on the e-commerce sector is another blow, as bricks and mortar retailers continue to operate on an uneven playing field.

“Of the £7.9bn that was raised through retail business rates in 2019/20, just over 5pc was raised from online retailers who at the time represented approximately 25pc of sales.

“We challenge this Government to be brave and smart enough to come up with a solution, so our high streets don’t have to shoulder virtually all of the tax burden for the retail industry and online pays its fair share.”

01:18 PM

City tycoon Michael Spencer slams bank taxes

Michael Spencer Budget 2021 - Andrew Crowley
Michael Spencer Budget 2021 - Andrew Crowley

After months of lobbying Rishi Sunak for a levy on bank profits to be cut from 8pc to 3pc, bankers have finally been granted their wish, writes Lucy Burton.

However banks’ combined corporation tax rate will still inch up to 28pc in 2023 – more than the 27pc they pay now. That has left some in the City frustrated.

Billionaire tycoon Michael Spencer argues that Sunak "should go further and remove the surcharge entirely".

He adds: "Our financial services industry needs Government support following Brexit and the pandemic and there is no justifiable reason why banks should pay more tax than any other company in Britain."

01:15 PM

Expert reaction: Rishi Sunak 'building a war chest'

Neil Shearing, chief economist at Capital Economics, says the Budget was more notable for what Rishi Sunak didn't announce than what he did.

The OBR handed Rishi Sunak a significant upgrade to its forecasts for the public finances but, while the Chancellor spent some of the windfall a substantial amount was saved – allowing the Chancellor to start building a war chest that could be deployed ahead of the next election.

The crucial part of this Budget was buried deep in Chapter 2 of the OBR’s document and surrounds its assumptions on the otherwise arcane subject of economic scarring. The OBR previously thought that the pandemic would permanently reduce the size of the UK economy by 3pc. It has now reduced that to 2pc.

Accordingly, it now thinks the economy will ultimately be larger than was previously the case – and with a bigger economy comes more tax revenues and an improved fiscal position.

01:12 PM

What does this mean for house prices?

House prices Budget 2021 -  Darren Staples/Bloomberg
House prices Budget 2021 - Darren Staples/Bloomberg

Melissa Lawford, property correspondent, explains what the latest forecasts will mean for the housing market.

Back in March 2021, after the Spring Budget, the OBR forecast a short-term rise in house prices, followed by a 2pc drop in 2022.

Now, it has cancelled its expectation of house price falls. But it still expects growth to decline rapidly, as the market readjusts following the end of the stamp duty holiday, which artificially fired up transactions.

The rate of house price growth will fall from its current rate of nearly 11pc to just 0.5pc by the middle of 2023, the OBR forecast.

This would be roughly in line with the sluggish 0.7pc growth rate recorded in October 2019, when the market was grappling with Brexit uncertainty.

A sharp slow down in the growth rate will bring the house price to earnings ratio, which is currently at the highest rate seen since before the financial crisis, back in line with the pre-pandemic level.

In turn, this will help to boost activity. The OBR expects house price growth to rise to 4pc by 2027.

01:10 PM

Public borrowing to drop below forecasts

In more encouraging signs of fiscal headroom for the Chancellor, the OBR's updated forecasts show government borrow is set to be much lower than initially thought.

01:08 PM

Brexit bubbles away in the Budget

Brexit may feel like a somewhat smaller story than the pandemic right now, but it has made an appearance in the Budget and OBR’s docs, writes Louis Ashworth.

The budget watchdog is sticking by an estimate – first made way back in 2016 – that the mid-term “scarring” from Brexit will be a 15pc fall in imports from and exports to the bloc.

There was a sharp fall in both during the first month of the year, though they subsequently recovered.

The OBR frames the drop as a longer, post-referendum issue, saying: “UK trade was lowered even before trading conditions with the EU changed, potentially due to anticipatory effects and the uncertainty created by the EU referendum”.

Meanwhile, the Budget itself contains – in a 202-page document – four paragraphs on “seizing the opportunities of Brexit”.

On the agenda: data reform, trade deals, those alcohol changes, the domestic flight cuts, and reforms to tonnage tax.

01:06 PM

OBR: Economy to recover by end of the year

One of the key upgrades in the OBR's forecasts was higher expectations for GDP growth – it now expects the economy to return to its pre-Covid levels by the end of the year.

01:04 PM

Wetherspoons surges as booze duties slashed

JD Wetherspoon appears to be a big winner of the Budget, with the no-frills pub chain jumping as much as 6pc during the Chancellor's speech.

It comes after Rishi Sunak unveiled a major simplification of alcohol duties, which will reduce taxes on cheaper drinks such as wine and beer.

There was also a 5pc tax cut on draught beer and cider, an end to the duty premium on sparkling wine and the planned increase to taxes on spirits has been cancelled. Cheers!

12:57 PM

IoD: 'Piecemeal' measures won't give businesses confidence

There's a more sceptical view from the Institute of Directors, which argues Rishi Sunak's measures will do little to improve confidence.

Kitty Ussher, IoD chief economist, says:

The crucial test for this Budget was whether it gave business the confidence to invest. The Chancellor’s business rates and R&D tax credit reforms are welcome but with hefty hikes in other taxation on the horizon, that may not be enough to convince business leaders to press go on their plans for growth.

He had an opportunity to partially reverse his previous decisions on employment and profit taxes, made in tougher times, but he chose not to do so.

While promising a ‘skills revolution’, the actual measures that were announced, while welcome, felt piecemeal, and will not give business confidence that we have a coherent plan to prevent future labour shortages for our post-pandemic era outside the EU.

12:55 PM

Expert reaction: Budget gives Bank of England food for though

James Antwis, analyst at HSBC Asset Management, says the Budget will give the Bank of England food for thought ahead of its key meeting on interest rates next week.

The Chancellor is moving away from big deficits and toward fiscal discipline at a time when UK GDP remains below its pre-pandemic trend. The Bank of England appears to be set for a rate rise before year-end.

However, the combination of higher rates and premature fiscal tightening could jeopardise the recovery and this means that today’s Budget should provide food for thought for the MPC ahead of next week’s policy meeting, and throws doubt on whether the Bank can raise rates as quickly as markets are currently pricing.

12:45 PM

What does this mean for household savings?

Will Kirkman, personal finance reporter, explains what the latest forecasts will mean for household savings:

Household savings pots will reduce in real terms next year after the Office for Budget Responsibility forecasted inflation to hit 4pc in 2022.

Interest rates on savings accounts are still recovering from last year's record lows, meaning the returns offered by banks will not keep pace with inflation’s eroding effects.

No conventional savings accounts match the current rate of inflation at 3.1pc. If CPI rises to 4pc, the spending power of household saving pots will reduce even faster.

At 4pc inflation, the spending power of £10,000 put in the best-paying easy-access account from Family Building Society at 0.65pc would be reduced to £9,664.

Fixed-rate bonds pay more, but require cash to be exposed to inflation for longer. The spending power of £10,000 put in the best-paying five-year bond from Gatehouse Bank at 2.05pc would be reduced to £9,033 in real terms.

12:42 PM

Expert reaction: This is a Boris Budget

Torsten Bell, head of the Resolution Foundation, says Rishi Sunak is gambling on the OBR forecasts being right as he splashes the cash.

12:40 PM

Budget speech ends

And that's it – Rishi Sunak has finished delivering his Budget speech and has sat back down.

Shadow chancellor Rachel Reeves will have her chance to respond now, plus we'll be getting the latest analysis in for you.

12:39 PM

Universal Credit taper slashed

Here's another rabbit we'd been expecting this morning – but it's even bigger than expected.

Rishi Sunak says he's cutting the rate of the taper on Universal Credit from 63p on the pound to 55p.

As a result, he says, nearly 2m families will keep, on average, an extra £1,000 a year.

Normally, this would be brought in in April. But the Chancellor says it'll be introduced within weeks and by 1 Dec at the latest

12:36 PM

Rishi Sunak outlines tax slashing plan

The Chancellor says he's not happy about rising taxes, but says it's unavoidable due to the "unprecedented" crisis of Covid.

He insists his plan is to slash taxes by the end of Parliament.

My goal is to reduce taxes. By the end of this Parliament, I want taxes to be going down not up. I want this to be a society that rewards energy, ingenuity and inventiveness. A society that rewards work.

12:34 PM

National Living wage increased

Another trailed announcement has just been confirmed – the National Living Wage will increase 6.6pc to £9.50 per hour.

It will benefit over 2m of the lowest paid workers in the country. It’s broadly consistent with previous increases and keeps us on track for our target of two thirds of median earnings by 2024. And a major commitment to the high-wage, high-skill, high-productivity economy of the future

12:33 PM

Fuel duty rise cancelled

As expected, the planned hike in fuel duty has been cancelled.

It'll be a major boost for drivers, who are facing surging prices at the pumps, but it's raised some eyebrows given the Government's climate push.

Mr Sunak says the freeze means the average tank of fuel will cost around £15 less per car, £30 less for vans and £130 less for HGVs.

12:31 PM

Turning on the taps

The alcohol announcements are still coming.

Rishi Sunak announces an end of the duty premium of 28pc for sparkling wines. He says this will benefit English and Welsh wines.

What's more, the tax on draught beer and cider will be cut by 5pc. Mr Sunak says this is the biggest cut to cider duty since 1923 and the biggest cut to beer duty for 50 years.

Finally, the Chancellor says the planned increase on duties on spirits such as whiskey will be cancelled.

Our reforms make the alcohol duty system simpler, fairer and healthier; They help with the cost of living while tackling problem drinking; They support innovative entrepreneurs and craft producers; They back pubs and public health; And they’re only possible because we’ve left the EU

12:28 PM

Sunak simplifies alcohol taxes

Here's one we were expecting: The Treasury will slash the number of alcohol duties from 15 to just six, which it says will radically simplify the process.

The new system is based around the principle that the stronger the drink, the higher the tax. So, some alcohols – stronger red wines, fortified wines, or high-strength ‘white ciders’ – will see their duties go up.

He says: "That’s the right thing to do, and it will help end the era of cheap, high-strength drinks which can harm public health and enable problem drinking."

By contrast, though, many lower alcohol drinks will see their taxes cut. Mr Sunak says they've been overtaxed for "many decades".

Rosé, fruit ciders, liqueurs, lower strength beers and wines will all be cheaper. This one gets a big cheer from MPs...

12:24 PM

Retail and hospitality get business rates relief

Here's a big one:

Rishi Sunak has announced companies in the retail, hospitality and leisure sectors will be given a 50pc discount on business rates. Pubs, music venues, cinemas, restaurants, hotels, theatres and gyms are all eligible. Overall, it's a tax cut worth £1.7bn.

There are big cheers in the House.

12:22 PM

Bank surcharge cut

The mooted reduction in the surcharge on bank profits has been confirmed - dropping from 8pc to 3pc. But combined with other tax rises, this still means bank's overall corporation tax will increase from 27pc to 28pc.

Small challenger banks are improving banking competition, which is good for the sector and good for consumers. So to help them, I will also raise the annual allowance to £100m.

12:18 PM

Air Passenger Duty slashed

As expected, Rishi Sunak confirms tax on domestic flights will be slashed.

From April 2023 flights between airports in England, Scotland, Wales and Northern Ireland will be subject to lower taxes.

The Chancellor says 9m passengers will their duty cut by half, while regional airports such as Aberdeen, Belfast, Inverness and Southampton will benefit.

But there's also a new tax to cut carbon emissions. Mr Sunak announces an ultra long haul band in Air Passenger Duty, covering flights of over 5,500 miles, with an economy rate of £91.

12:15 PM

'Science and tech superpower'

There are a string of further measures now which, put together, the Chancellor says will make Britain a science and tech superpower.

They include the UK's net zero strategy, a £1.4bn Global Britain Investment Fund and a scale-up visa fund.

He says:

£22bn investment in R&D. The Net Zero strategy. The Future Fund. Help to Grow. More regional finance. Unlocking institutional capital. A more competitive visa system. And a modernised R&D tax credits regime.

Enough action to prove the hypothesis: We’re making this country a science and technology superpower

12:11 PM

Research & Development ramped up in science boost

Rishi Sunak is laying out a vision of Britain's future as a world leader in science and technology. To do this, he says, there'll be a huge boost to research and development.

The Treasury has promised £20bn for R&D by the end of Parliament, in addition to tax reliefs.

Put together, this means total public investment in R&D is increasing from 0.7pc of GDP in 2018 to 1.1pc of GDP by the end of the Parliament.

This is ahead of Germany, France and the US, he says.

12:08 PM

Rishi Sunak at the despatch box

Rishi Sunak Budget
Rishi Sunak Budget

12:07 PM

Infrastructure: Building back better

Rishi Sunak is now focusing in on infrastructure. He points to the Government's rail plan, which will be announced soon. There's no mention of HS2, though.

He pledges:

£2.6bn for a long-term pipeline of over 50 local roads upgrades. Over £5bn for local roads maintenance, enough to fill 1m more potholes a year. And funding for buses, cycling and walking totalling more than £5bn.

12:03 PM

Only way to pay for spending is economic growth

The Chancellor is changing tack now, with a shift in focus to the levelling up agenda:

Our stronger economy allows us to fund world class public services - the people’s priority. But over the long-term the only way to pay for higher spending is economic growth.

And if we want to see higher growth, we’ve got to tackle the problem that’s been holding this country back for far too long: Our uneven economic geography.

12:02 PM

Sunak reels off the cash pledges

The Chancellor is rattling through it now, reeling off a string of spending pledges.

They include:

  • £640m a year for rough sleeping and homelessness

  • Money to recruit 20,000 new police officers and an extra £2.2bn for courts, prisons and probation service

  • £3.8bn to the "largest prison-building programme in a generation"

  • £300m for parenting programmes

  • £150m to support training and development for the entire early years workforce

  • An extra £4.7bn for schools

  • Over £200m to build or transform up to 8,000 state-of-the-art community football pitches across the UK

  • Funding to turn over 100 areas of derelict land into new ‘pocket parks’

  • Tax relief for museums and galleries extended for two years to March 2024

11:57 AM

Chancellor confirms housing boost

On to housing now, as Rishi Sunak focuses in on key Tory promises.

He confirms the total housing spending will total nearly £24bn, with more money for affordable housing and a commitment to bringing more brownfield land into use.

There's also £5bn to remove unsafe cladding from the highest risk buildings.

11:54 AM

Health to receive £44bn boost

The Chancellor is kicking off the spending review now, starting with health.

He says spending on healthcare will increase £44bn to over £177bn by the end of this Parliament. There will also be extra revenue from the previously announced health and social care levy, which is being funded by a hike to National Insurance.

Mr Sunak confirms previously announced measures including more investment in research and development, as well as more operating theatres to tackle the Covid backlog.

11:51 AM

Debt set to peak in 2024

Rishi Sunak says underlying debt is forecast to be 85.2pc of GDP this year. It will rise further and peak in 2023-24, before falling in the final three years of the forecast from to 83.3pc.

Borrowing as a percentage of GDP is forecast to fall in every single year.

11:47 AM

Scarring predictions lowered

The fiscal watchdog has also lowered the expected level of scarring – or the expected level the economy will suffer compared to a scenario without Covid.

This has been cut down from 3pc to 2pc.

11:45 AM

Unemployment better than feared

There's also good news for unemployment.

In July last year, at the height of the pandemic, unemployment was expected to peak at 12pc. Now, the OBR expects a peak of 5.2pc.

Mr Sunak says that's 2m fewer people out of work than previous expected.

11:44 AM

Growth upgraded to 6.5pc

As expected, the OBR is upgrading its forecasts for the UK economy – a positive sign of a better-than-expected recovery.

Rishi Sunak says the watchdog now expects the economy to return to its pre-Covid level at the turn of the year –earlier than they thought in March.

Growth this year is revised up from 4pc to 6.5pc. The OBR then expect the economy to grow by 6pc in 2022, and 2.1pc, 1.3pc and 1.6pc over the next three years.

11:43 AM

HGV levy suspension extended

To huge cheers, Rishi Sunak begins dropping in some new measures. First, it's taxes on lorries:

To address the driver shortage, the Transport Secretary is introducing temporary visas, tackling testing backlogs, changing cabotage requirements and is today announcing new funding to improve lorry park facilities.

We’ve already suspended the HGV levy until August and I can do more today, extending it for a further year until 2023, and freezing Vehicle Excise Duty for heavy goods vehicles.

11:39 AM

Budget does not draw a line under Covid

Mr Sunak says the Budget does not draw a line under Covid. However, it "does begin the work of preparing for a new economy post Covid".

He outlines the challenges facing the economy, including inflation, supply chain disruption and surging energy prices.

11:38 AM

Opportunity should be a birth right

The Chancellor says the budget will back business and help working families. There's also the first mention of the Government's favourite "levelling up" pledge.

For too long, far too long, the location of your birth has determined too much of your future. Because the awesome power of opportunity shouldn’t be available only to a wealthy few… but be the birth right of every child in an independent and prosperous United Kingdom

11:36 AM

'Our plan is working'

Rishi Sunak begins with an upbeat view of the economy:

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.

11:34 AM

Rishi Sunak begins Budget

Chancellor Rishi Sunak has stood up to deliver his Budget. Live updates coming.

11:27 AM

Shadow chancellor Rachel Reeves to respond to Budget

Shadow chancellor Rachel Reeves - Aaron Chown/PA Wire
Shadow chancellor Rachel Reeves - Aaron Chown/PA Wire

In a shock move this afternoon, Sir Keir Starmer has been forced to drop out of PMQs and the Budget after testing positive for Covid-19.

Ben Riley-Smith writes:

The Labour leader is understood to have got the positive result in a test conducted just before Prime Minister’s Questions.

One Labour source told The Daily Telegraph that Sir Keir’s positive test result dropped just moments before he headed into the Commons for PMQs.

Ed Miliband, the former Labour leader and shadow business secretary, was the first to cover for his boss as a result.

Rachel Reeves, the shadow chancellor, will deliver Labour’s response to the Budget - often dubbed the most difficult speech in the parliamentary calendar given the details of the Budget are closely kept.

11:18 AM

Boris Johnson clashes with Ed Miliband over climate change

Boris Johnson and Ed Miliband are clashing over climate issues at PMQs.

The Prime Minister accused Labour of being overrun by the "paymasters" of the union GMB as he shrugged off criticisms of the Government's climate policy.

But the shadow business secretary hit back at Mr Johnson, saying the country needed "statesmanship, not partisanship".

He added: "He should not be trying to score party political points on such an important issue facing our country and our world."

11:06 AM

Keir Starmer tests positive for Covid-19

Sir Keir Starmer is isolating after testing positive for Covid-19.

The Speaker confirmed that the Labour leader has contracted the virus and will not be able to grill the Prime Minister. He also won't be able to attend the Budget.

Ed Miliband, the shadow Business Secretary, is asking questions instead.

11:02 AM

Prime Minister's Questions kicks off

Boris Johnson has taken to the despatch box now as Prime Minister's Questions kicks off.

PMQs are taking place as usual, with the Prime Minister fielding questions from MPs. But it's a pre-cursor to today's main event.

Rishi Sunak will deliver the Budget once PMQs have finished – at around 12.30.

10:52 AM

Speculation mounts over beer duty cut

Beer duty Rishi Sunak Chancellor Budget 2021 - Yui Mok/PA Wire
Beer duty Rishi Sunak Chancellor Budget 2021 - Yui Mok/PA Wire

Another key point of speculation has been beer duty, with expectation brewing that the Chancellor could slash duties on the nation's favourite tipples.

The tax cut has been tipped as a potential surprise measure in Rishi Sunak's Budget after dozens of MPs backed the move.

A cut to alcohol duties, which are considered overly complicated, would be a boost to Britain's hospitality industry as it emerges from the pandemic.

Mr Sunak and Boris Johnson are both set to appear at a brewery for a photoshoot later today, which has fuelled expectations that a cut is upcoming.

10:33 AM

Expert view: OBR forecasts will be 'very outdated'

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, warns that the OBR's fiscal forecasts will be "very outdated".

The fiscal watchdog closed its forecast more than a month ago on 24 September. This came after a request from the Treasury.

The move has sparked accusations that the Chancellor is trying to deter departments from asking for more cash by giving a more pessimistic outlook on public finances than current data would show.

It also should mean he has more wiggle room to announce tax cuts at his next Budget ahead of the next general election.

10:23 AM

Analysis: Sunak feels the heat over energy bills

Another area of potential political pressure that Rishi Sunak will no doubt be conscious of is rising bills, writes politics live editor Catherine Neilan.

The Chancellor has looked to address some of the components of the ongoing cost-of-living crisis by announcing a thaw of the public sector pay freeze and a 6.6 per cent increase to the national living wage. Reducing the Universal Credit taper will also go some way to lighten the load, if that comes through.

But Sir Keir Starmer, the Labour leader, this morning highlighted yet another hot topic: energy bills.

"The Budget must take the pressure off working people," he said. "With costs growing and inflation rising, Labour would cut VAT on domestic energy bills immediately for six months."

Will Mr Sunak look to cut the opposition off at the knees by doing precisely that?

Read more in Catherine's live blog

10:20 AM

What will the Budget mean for house prices?

Britain’s property market has been flying at 1,000 miles per hour since the housing market reopened, fired up in part by Chancellor Rishi Sunak’s stamp duty tax giveaway.

Now, Mr Sunak’s autumn Budget comes at a time of transition. The market is adjusting to the end of the stamp duty holiday. Prices have been underpinned by an extreme shortage of supply, but demand is cooling.

The Telegraph's Money team has looked at what the Budget could mean for the housing market - read their full analysis here.

10:09 AM

Expert view: Consensus is quite clear

Simon Harvey at Monex Europe says there's a "clear consensus" on what Rishi Sunak will announce this afternoon.

09:47 AM

Rishi Sunak leaves Downing Street

Rishi Sunak has left Downing Street and is being driven the short distance down the road to the House of Commons.

He appeared alongside his team for the classic pre-Budget snap holding the red box outside No. 11.

Rishi Sunak Budget Downing Street - BEN STANSALL/AFP via Getty Images
Rishi Sunak Budget Downing Street - BEN STANSALL/AFP via Getty Images

09:45 AM

Keir Starmer: Budget must take pressure off working people

Keir Starmer has chimed in ahead of the Budget, laying out his alternative proposals.

The Labour leader said his party would cut VAT on energy bills for six months to take pressure off households amid rising inflation.

He adds Labour wouldn't lift taxes on working people, "unlike the Tories", and would clamp down on the low tax bills paid by tech giants.

09:32 AM

Budget bunnies: What rabbits does Rishi have?

With most of the announcements trailed over the last few days, the real focus is on what rabbits Rishi Sunak could pull out of his hat.

The frontrunner at the moment is the cut to the Universal Credit taper, but could there be more?

The Telegraph's political editor Ben Riley-Smith says moves to counteract the cost of living crunch are the most likely.

09:21 AM

Budget 2021: Drinking in the drama

Budget day is home to one of Westminster's best-known traditions – the chance for the Chancellor to have a tipple as he or she delivers the spending plan.

Finance ministers down the ages, from William Gladstone to Ken Clarke, have indulged at the despatch box. But in recent years of austerity this tradition has been sidelined, with Chancellors opting instead for water.

Rishi Sunak is certain to do the same today, not least because he's teetotal.

Meanwhile, betting markets are having their fun with predictions today. According to Sporting Index, the Chancellor will take four sips of water during his speech, and it will last one hour on the dot.

09:11 AM

Corporate round-up

With all focus on the Budget, it's a fairly quiet day for corporate announcements. Still, we wouldn't want you to miss out, so here's a brief round-up of what else is happening on the markets:

Santander:

Santander said it’s seen the strongest demand for mortgages in the UK for “many, many years”, helping drive growth at the Spanish lender.

The bank said mortgage lending to British individuals rose 4.4pc to £174bn as it reported third-quarter results. Chief financial officer Jose Garcia Cantera said Santander was expecting interest rates to rise to 1pc by the end of next year.

Wickes:

Wickes has reported a slowdown in sales in the third quarter compared to the same period last year, when lockdown drove a DIY boom.

The company stuck to its outlook, saying full-year profit would be at the upper end of its range of £55m to £74m. It said supply shortages had had no material impact, but it was battling higher costs.

Aveva:

IT consulting group Aveva has posted a 9pc rise in sales for the first half, which it said drove growth in adjusted profit. Investors were unimpressed, however, and shares are down 1.8pc.

GlaxoSmithKline:

GSK has appointed genetics professor Harry Dietz to its board ahead of the planned spin-off of its consumer unit. The company will release third-quarter figures this afternoon.

08:58 AM

The post-Covid Budget: A tall order?

There's often a lot of chatter on the internet about Rishi Sunak's height – at 5ft 6 he's one of the shorter men in Parliament.

So put alongside Simon Clarke, there's something of a height difference. At 6ft 7, he's thought to be the second-tallest MP.

All credit to the Treasury photographer, then, who was tasked with snapping them side-by-side.

Chancellor Rishi Sunak with Chief Secretary to the Treasury Simon Clarke - Simon Walker HM Treasury
Chancellor Rishi Sunak with Chief Secretary to the Treasury Simon Clarke - Simon Walker HM Treasury

08:50 AM

What can we expect from the fiscal watchdog?

Alongside Rishi Sunak's speech this afternoon, the Office for Budget Responsibility (OBR) will release its latest fiscal outlook.

This is expected to contain downward revisions, with the latest figures showing economic growth and public borrowing are both well ahead of previous forecasts.

Peter Schaffrik at RBC Capital Markets says:

While we expect some of the better-than-expected performance of the public finances year-to-date to fade going forward and debt repayments to be higher than expected due to higher RPI [retail price index], we still expect the borrowing estimate for the current fiscal year (2021/22) to be £25bn lower than forecast in March.

Beyond the current fiscal year, what the OBR thinks the ‘scarring’ effects of the pandemic will be has a major influence on the borrowing forecast. For the Debt Management Office remit, we estimate a reduction of £33bn.

Given the large and late nature of the revision in the fiscal year, we expect it to be facilitated by reducing both Gilt sales and the stock of Treasury bills in fiscal year 21/22 (by around £20bn and £13bn, respectively, versus the current Remit) to avoid too much market disruption.

08:37 AM

Sterling holds steady

Sterling is holding steady this morning as traders look ahead to this afternoon's Budget bonanza.

The pound is marginally weaker against the dollar at $1.375, while it's trading down 0.1pc against the euro at 84.4p.

Rishi Sunak is preparing to unveil a raft of spending plans. But optimism is being held back by inflation fears, as well as labour shortages and supply chain disruption.

The swathes of pre-Budget announcements from the Treasury also mean there are unlikely to be many surprises when the Chancellor stands up to speak in the Commons.

Forex dealer Argentex said: "The budget will be watched for further detail on the UK’s post-Covid fiscal path, but rarely do measures have a lasting impact" on markets.

08:26 AM

Business rates in focus

One key area of interest today will be business rates. The Confederation of British Industry (CBI) has led calls for a major shake-up of the levy, arguing it unfairly disadvantages brick-and-mortar retailers compared to online rivals.

The Chancellor is expected to unveil a business rates exemption for green property investments today as part of the Government's climate push. However, wider reform is unlikely.

There's also been talk of an Online Sales Tax – often dubbed the Amazon Tax – that could charge a 2pc levy on online retailers. Again, though, no major overhaul is expected today.

Lee Nuttall, head of tax at law firm Gowling WLG, says

With murmurs that the government’s long-overdue overhaul of the business rates system will be further delayed, dismayed retailers will be crying out for a further extension to the holiday period beyond the end of this year.

The beleaguered High Street badly needs a substantive and joined up approach to business rates that will lower overall bills and significantly reduce the burden that weighs so disproportionately heavily on the retail sector.

08:07 AM

Cabinet ministers arrive in Downing Street

Ministers have arrived in Downing Street for a Cabinet briefing from Rishi Sunak – his first official engagement of the day.

He'll step outside with the famous red box at around 10.45 for a photo opp, before making his way over to Parliament.

Prime Minister's Questions is scheduled to kick off at midday as usual, with Mr Sunak standing up to deliver his Budget and Spending Review at around 12.40pm.

Home Secretary Priti Patel - Victoria Jones/PA Wire
Home Secretary Priti Patel - Victoria Jones/PA Wire
Health Secretary Sajid Javid - REUTERS/Peter Nicholls
Health Secretary Sajid Javid - REUTERS/Peter Nicholls
Justice Secretary Dominic Raab - REUTERS/Peter Nicholls
Justice Secretary Dominic Raab - REUTERS/Peter Nicholls
Foreign Secretary Liz Truss -  REUTERS/Peter Nicholls
Foreign Secretary Liz Truss - REUTERS/Peter Nicholls

07:58 AM

Rishi Sunak to cut tax on domestic flights

The latest update this morning is on domestic travel, with the Chancellor set to slash taxes on flights within the UK.

The Independent reports that Rishi Sunak will cut Air Passenger Duty (APD) on departures between Great Britain and Northern Ireland to zero.

In addition, flights to airports in the Scottish highlands and islands are expected to become APD-exempt.

The tax cut is set to be portrayed as part of the Government's "levelling up" agenda, but it will raise eyebrows about the UK's climate policy, especially ahead of the COP26 summit next week.

07:46 AM

Robert Jenrick: There are reasons for optimism

Robert Jenrick Budget 2021 - Wiktor Szymanowicz/Barcroft Media via Getty Images
Robert Jenrick Budget 2021 - Wiktor Szymanowicz/Barcroft Media via Getty Images

Tory MP Robert Jenrick has said there are "reasons for optimism" ahead of today's Budget, where we will hear revised forecasts from the Office for Budget Responsibility.

The former housing secretary said better-than-expected growth and unemployment figures will "give the Chancellor some room" when he unveils his spending plans this afternoon.

He told Sky News: "We are all going to be better off - OBR forecasts will show the economy has grown substantially, therefore we are borrowing less as a country and can invest more in services that we all depend on like the NHS.

"But we also need to think carefully about those on the most modest incomes and help them weather what is undoubtedly going to be a difficult period."

He noted that some risks remain, which required Rishi Sunak to be " fiscally prudent", particularly inflation, with the knock-on consequences of interest rate rises which would be "very costly to the country."

07:37 AM

FTSE risers and fallers

It's a slow start to the day for the FTSE as investors await more details from the Chancellor this afternoon.

The blue-chip index opened 0.1pc lower and is now trading marginally down at 7,270 points, ending a three-day rally.

Miners are the biggest barrier to gains this morning, with Fresnillo leading the fallers, down 2.6pc after delivering a first-half update. Anglo American, Glencore and Antofagasta were also down, tracking lower metals prices.

Darktrace is at the top of the index with arise of 3pc. It's clawing back some losses after a sceptical analyst note wiped £1bn off its market value earlier in the week.

The domestically-focused FTSE 250 has ticked up marginally, with First Group jumping 6pc after announcing a £500m tender offer.

07:28 AM

Covid costs could force Sunak to slash extra £5bn, economists warn

Ministers will need to cut public spending by a further £5bn to fund the Chancellor’s planned savings drive as extra Covid costs threaten to hit budgets, economists have warned.

My colleague Tom Rees has more details:

Deutsche Bank said unprotected budgets for organisations such as universities and councils could be squeezed by Rishi Sunak in his Spending Review on Wednesday due to prolonged pandemic-related costs that risk ramping up funding pressures in the coming years.

The Chancellor is set to announce a boost to overall departmental spending, but the bank's economists said ministers will be forced to find an extra £5bn of cuts in unprotected budgets by 2025-26.

Sanjay Raja, an economist at Deutsche Bank, said: “This would take total consolidation up to £35bn by the end of the Office for Budget Responsibility's forecast horizon, relative to what was pencilled in last November.

“In terms of where some spending cuts can come from, we see ‘unprotected’ budgets particularly in further education, local governments, and courts more exposed to the Chancellor’s efficiency and spending drive.”

The Chancellor will unveil the first multi-year Spending Review since 2015 on Wednesday, setting spending limits for departments for the next three years.

Read Tom's full story here

07:19 AM

FTSE 100 dips at the open

The FTSE 100 has started the day slightly lower as markets turn their attention to the Budget this afternoon.

The blue-chip index was down 0.1pc at the open to 7,271 points.

07:01 AM

Speculation mounts over Universal Credit U-turn

It's early in the day, but we've already got a glimpse of what Rishi Sunak's rabbit in the hat could be – a scaling back of the cut to Universal Credit.

The Chancellor is said to be considering a cut to the taper rate on Universal Credit. At the moment, Britons are effectively taxed 63p in the pound on anything they earn over their base level of benefits.

But the Sun reports that this could be slashed down to 60p to help incentivise people to work. It would also help soften the blow of scrapping the £20 per week uplift brought in during the pandemic.

06:35 AM

Rishi Sunak hails 'age of new optimism'

Rishi Sunak is gearing up to outline his vision for an economy “fit for a new age of optimism” as he looks to draw a line under costly Covid spending.

The Chancellor is set to focus on key Tory pledges such as transport and wage growth, as well as delivering promises ahead of the next election.

The upbeat tone comes after better-than-expected growth and borrowing figures gave Mr Sunak tens of billions of pounds extra to spend.

He is expected to say:

Today’s Budget begins the work of preparing for a new economy post Covid. An economy of higher wages, higher skills, and rising productivity. Of strong public services, vibrant communities and safer streets. An economy fit for a new age of optimism. That is the stronger economy of the future.

Read more: Rishi Sunak foresees ‘new age of optimism’ as he starts building for life after Covid

06:23 AM

It's Budget day

Good morning.

The big day is here – Rishi Sunak will deliver his Budget speech this afternoon, outlining the next steps in the country's recovery plan.

While much of the spending plan has already been announced, we'll be looking for more details behind the big headline numbers. We'll also see if the Chancellor pulls any rabbits out of the hat.

Follow along for all the coverage and analysis before, during and after the speech.

5 things to start your day

1) Rough gas storage site may be reopened to beat energy crisis - Higher customer energy bills could be used to pay for the reopening according to British Gas owner Centrica.

2) Ladbrokes owner down as DraftKings scrap £18bn deal - More than £800m wiped off Entain's stock market value after US company decides not to make a firm offer.

3) Labour-controlled council taken over after property bets leave £100m black hole - Slough is now trying to sell commercial property assets worth £600m as part of a rescue plan imposed by ministers.

4) Google and Microsoft reveal record profits - A post-pandemic resurgence in advertising demand brought in billions more dollars for the search giant.

5) Covid costs force Sunak to slash extra £5bn, economists warn - Budgets for universities and local councils face cuts as resources are reallocated, says Deutsche Bank.

What happened overnight

Hong Kong led most Asian markets lower on Wednesday with tech firms in the firing line after China Telecom was banned from the US. The Hang Seng Index was more than 1pc lower and the Hang Seng Tech Index lost more than 3pc, with Tencent, Alibaba, JD.com and XD Inc taking a hit. Tokyo, Shanghai, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta all dropped, though Singapore rose.

Coming up today

Corporate: GlaxoSmithKline (interims); Aveva, Network International Holdings, Fresnillo, Centamin, ContourGlobal (trading update)

Economics: Budget (UK), Durable goods orders (US), non-defence capital goods orders (US)

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