Rishi Sunak Hoists Red Ensign, Hands Out Populist Prosecco Tax Cut in Heavily Leaked Budget Speech
14:42 GMT 27.10.2021 (Updated: 12:31 GMT 01.03.2022)
The Chancellor of the Exchequer, Rishi Sunak, has already leaked large portions of his Budget speech to the media. So is there anything in the announcement that we did not already know?
Rishi Sunak had leaked
much of his Budget speech in advance but he still had a few rabbits in his hat when he delivered it in Parliament.
Sunak had already leaked plans to end the pay freeze for public-sector workers, increase the National Living wage from £8.91 an hour to £9.50 and splashing £7 billion on public transport in cities outside London as part of the regional levelling-up agenda.
The £3 billion for a "skills revolution" was also old news but here is what had not been trailed in advance.
Shipping Tax Reforms
Rishi Sunak announced post-Brexit changes to the tonnage tax, a duty which few outside of the merchant shipping industry have heard of.
Shipping companies using British ports can choose to pay tonnage tax instead of corporation tax.
The amount is calculated from the net tonnage of a company’s ships.
Currently, ships flying the flag of the European Union can apply for tax relief but Sunak announced plans to remove this and instead give tax relief to companies who use the red ensign, the flag of the British merchant navy.
The red ensign, a scarlet flag with the Union Jack in the top left corner, dates back to 1707 and is a proud emblem of Britain’s rich maritime past.
Alcohol Duty Simplification
Sunak’s populist touch did not fail him when it came to alcohol duty.
He announced the most radical simplification of alcohol duty for 140 years - reducing the number of duty rates from 15 to six - and cut tax on sparkling wines like Prosecco, consumption of which has doubled in recent years.
Sunak said: "I'm going to end the irrational duty premium of 28% that they currently pay. Sparkling wines - wherever they are produced - will now pay the same duty as still wines of equivalent strength".
There was also good news for the struggling pub industry - for the first time the Chancellor announced a special tax relief for draught beer served in pubs, as opposed to the canned or bottled types.
That will cut tax on draught beer by five percent although that only amounts to about three pence per pint.
While the new simplified system will not come into effect until April 2023, there was better short-term news when he cancelled an increase in duty on spirits, wine, cider and beer which had been due to come into effect at midnight.
More Cash For Scotland, Wales And Northern Ireland
Sunak was generous with the “devolved” nations: the Scottish government will get an extra £4.6 billion a year, the Welsh government £2.5 billion more per year and the Northern Ireland Executive an extra £1.6 billion a year.
He said he wanted the “whole of the UK to benefit from its prosperity” and said it proved the benefits of being part of the UK.
But he added: “We are bound together by more than transactional benefits. We are bound together by history and culture…we will always be one family. One United Kingdom”.
Scottish Minister Nicola Sturgeon, who is pushing for a second referendum on independence, might disagree.
The government also announced £1.7 billion on projects in Aberdeen, Clwyd South, Sunderland, Doncaster, Leeds, Stoke-on-Trent and Ashton-under-Lyne.
Money For Museums And Galleries
While Sunak’s Budget was mainly aimed at low wage-earners and those in traditional working class parts of the country, there was also a gift for the highly-educated middle classes.
Sunak announced theatres, art galleries and other cultural businesses would get tax relief of around £250 million and he announced an £800 million pot of money to renovate local libraries and museums.
“Levelling up is also about protecting our unique culture and heritage”, said Sunak, who also announced plans for a new “Beatles attraction” on the waterfront in Liverpool.
Unexpected Boost to Universal Credit
Sunak left the best until last.
Universal Credit has given the government nothing but bad headlines - it is withdrawing a £20 increase it gave last year to help people through the pandemic.
But Sunak changed the narrative when he announced the government was cutting the Universal Credit Taper Rate from 63p to 55p and increasing work allowances by £500 per year.
This could help low wage-earning families by up to £1,000 a year and is expected to affect 1.9 million families.