AUTUMN BUDGET AND SPENDING REVIEW 2021

1 AUTUMN BUDGET AND SPENDING REVIEW 2021A STRONGER ECONOMY FOR THE BRITISH PEOPLER eturn to an order of the House of Commons dated 27 October 2021 Copy of the BUDGET Report October 2021 as laid before the House of Commons by the Chancellor of the Exchequer when opening the SPENDING REVIEW 2021 is presented to the House of Lords by Command of Her Frazer Her Majesty s Treasury 27 October 2021 Ordered by the House of Commons to be printed 27 October 2021HC 822 Crown copyright 2021 This publication is licensed under the terms of the Open Government Licence except where otherwise stated. To view this licence, visit we have identified any third party copyright information you will need to obtain permission from the copyright holders publication is available at enquiries regarding this publication should be sent to us at 978-1-5286-2957-7E02685808 10/21 Printed on paper containing 75% recycled fibre content minimumPrinted in the UK by HH Associates Ltd.

2 On behalf of the Controller of Her Majesty s Stationery OfficeThe BUDGET report is presented pursuant to section 2 of the BUDGET Responsibility and National Audit Act 2011 and in accordance with the Charter for BUDGET BUDGET and SPENDING REVIEW 2021 ContentsPageExecutive Summary 1 AUTUMN BUDGET and SPENDING ReviewChapter 1 Economy and public finances 11 Chapter 2 Building back better 47 Chapter 3 Delivering for all parts of the UK 85 Chapter 4 Departmental settlements 93 Chapter 5 Policy decisions 133 Annex A The government s fiscal framework 149 Annex B Impacts on Equalities 161 Annex C Financing 165 Annex D OBR s Economic and fiscal outlook: selected tables 169 Annex E Statistical annex 179 List of abbreviations 193 AUTUMN BUDGET and SPENDING REVIEW 2021 Executive summary1 AUTUMN BUDGET and SPENDING REVIEW 2021 AUTUMN BUDGET and SPENDING REVIEW 2021 takes place as the country focuses on recovering from a period of unparalleled global economic uncertainty and challenge to move towards a more promising future.

3 The successful vaccination programme and the government s economic plan have led to faster than anticipated growth, and a strong recovery in employment across the country. With the economic recovery underway and emergency support winding down, the BUDGET and SR sets out the government s plans to build back better over the rest of the Parliament. It does so by investing in strong public services, driving economic growth, leading the transition to net zero, and supporting people and businesses. At the heart of these plans is the government s ambition to level up, reducing regional inequality so that no matter where in the UK someone lives, they can reach their full potential, find rewarding work and take pride in their local REVIEW 2021 (SR21) sets departmental budgets up to 2024-25.

4 Every department s overall SPENDING will increase in real terms as a result of SR21, and over this Parliament,1 allowing for the additional provision that the government has set aside to take Official Development Assistance (ODA) to of Gross National Income (GNI) in 2024-25. Total departmental SPENDING is set to grow in real terms at a year on average over this Parliament a cash increase of 150 billion a year by 2024-25 ( 90 billion in real terms). This is the largest real-terms increase in overall departmental SPENDING for any Parliament this century. This includes taking forward plans to deliver over 600 billion of public sector gross investment over this Parliament. Taxpayers money will be spent where it makes the most difference to people s daily lives: creating high-wage and high-skilled jobs, reducing NHS waiting lists, putting more police on the streets, upgrading roads and railways, and building new homes, hospitals and pandemic has demonstrated the risk of unforeseen shocks and there remains uncertainty around the path of the virus.

5 The government is acting responsibly and ensuring the public finances are on a sustainable path, so these risks can continue to be managed into the future. The BUDGET and SR announces new fiscal rules that will allow the government to continue funding first-class public services and drive economic growth through record investment, while ensuring that debt falls over the medium economic context Thanks to the government s vaccine programme, the pandemic support provided to families and businesses, the underlying resilience of the economy, and the Plan for Jobs, the UK economy has seen faster than anticipated growth after the largest recession on Over this Parliament refers to the period from financial years 2019-20 to Plan for Jobs , HM Treasury, July 20202 AUTUMN BUDGET and SPENDING REVIEW 2021 The government took unprecedented action to support jobs.

6 Public services and businesses throughout the pandemic. Overall, this government has provided 378 billion of direct support for the economy over the last year, including the Coronavirus Job Retention Scheme, which supported million jobs in Government action has led to a strong recovery in the labour market across every part of the UK, and the pandemic is now expected to have a smaller long-term effect on the economy than previously anticipated. Following the transition away from emergency economic support, the BUDGET and SR focuses on economic the same time, the easing of restrictions and the rapid return of economic activity globally has led to a substantial rise in commodity and raw material prices, as demand for inputs has outpaced production.

7 The government is taking action to help firms tackle supply chain issues and labour market shortages, including by helping people into work and helping businesses get the skills they need through the Plan for Jobs. Alongside these global supply issues, increases in transportation and energy costs have also pushed up inflation in many advanced economies, including in the UK, and the OBR expects inflation to remain elevated across 2022 and 2023. The government is committed to price stability and the Chancellor has re-affirmed the Bank of England s 2% consumer price inflation target at the BUDGET . The strong recovery in the labour market has been accompanied by rising wages, which has helped to support household living standards in the face of price rises.

8 The public finances The recovery and the action taken by the government over the past year means that the public finances are stronger than expected in the OBR s March However, while the costs of inaction would have been far greater, borrowing and debt remain at historically high levels. This additional borrowing is currently affordable, but there are significant risks associated with elevated levels of debt including the increased sensitivity of the public finances to changes in interest rates and inflation. The fiscal impact of a one percentage point rise in interest rates in the next year would be six times greater than it was just before the financial crisis, and almost twice what it was before the Taxpayer money spent servicing debt is money which could have been invested in public is why the government has taken early action to repair the public finances.

9 This has included taking difficult but responsible decisions to raise taxes to ensure sustainable public finances and deliver the long-term funding needed for public government s commitment to sustainable public finances over the medium term is underpinned by new fiscal rules. These ensure that the government s SPENDING plans are consistent with reducing debt from its historically high level. The OBR forecast confirms the fiscal mandate is met with debt as a proportion of GDP falling from 2024-25. In addition, the current BUDGET is in surplus in 2024-25, public sector net investment averages of GDP over the rolling forecast period, and the welfare cap is deliver the government s priorities while meeting these fiscal rules, SR21 ensures that the government continues to spend taxpayers money well.

10 Decisions have been based on how SPENDING will contribute to the delivery of each department s priority outcomes, underpinned by high-quality evidence. The government has also taken further action to drive out inefficiency; SR21 confirms savings of 5% against day-to-day central departmental budgets in Coronavirus Job Retention Scheme Statistics , HMRC, October 20214 Economic and fiscal outlook , OBR, March 20215 Fiscal Risks Report , OBR, July 2021. 3 AUTUMN BUDGET and SPENDING REVIEW 2021 Strong and innovative public servicesThe BUDGET and SR invests in the recovery, reform and resilience of the public services that people rely on, to ensure they are fit for the future and to drive up standards across the country.