Budget 2021 predictions: what is Rishi Sunak expected to say in autumn spending review?

Rishi Sunak will stand at the dispatch box on Wednesday to deliver the autumn budget and the three-year spending review.

It will be the second budget delivered this year, following the March announcement, and the first since the majority of Covid support has been withdrawn.

What spending has already been announced?

The government has already announced some of the measures set to be in the autumn budget, and there are also previous announcements set to come into effect after this budget.

In the days leading up to the budget a number of measures that will be announced on Wednesday have been briefed to the media ahead of time.

These include a £5.9bn capital spending boost for the NHS, aimed primarily at clearing the backlog by upgrading key infrastructure.

Among the other spending pledges to be announced this week are a £6.9bn capital boost to improve transport links all over the country, £5bn toward scientific research and development and a £3bn investment in skills training.

The pledges and a handful of others all relate to capital spending, while further information on departmental budgets - which set the levels of day to day spending - will come on Wednesday, with some cuts expected.

The government has also been criticised already for attempting to present some of the pledges as entirely new, when some of the money has already been announced.

On transport spending for instance, Sunak admitted on the Andrew Marr Show that of the £6.9bn, only £1.5bn was new money which had not previously been announced.

It has also been announced that the National Living Wage will increase next year, from £8.91 to £9.50 per hour, and the public sector pay freeze will come to an end - although the scale of the increase is yet to be confirmed.

What about tax increases?

It was revealed earlier this year that National Insurance will rise by 1.25% in April next year, with the proceeds of the increase ring fenced for NHS and social care spending.

Alongside this, Dividend tax will also increase by 1.25%.

While Rishi Sunak has described himself as a ‘low tax Conservative’ he has not ruled out further tax increases in this budget, but has spoken down the prospect of further borrowing to fund spending.

This means there are likely to be some extra tax increases in the budget, though it is as yet unclear whether they will be applied uniformly, by an increase in the basic rate or reduction of the threshold, or whether they will target certain forms of income.

There has been speculation that Sunak will move to increase Capital Gains Tax, the tax paid on profit gained from selling an asset (such as stock, or a second home) to bring it closer in line with income tax.

There have also been reports that the Treasury is considering a significant shake up of the student finance system, meaning that the threshold at which graduates start paying back their loans could be lowered.

In a move likely to cause some controversy considering the tax rises faced by workers, Sunak is also said to be planning a tax cut for the banking industry, with a reduction in the corporation tax surcharge enforced on the industry from 8% to 3% from April 2023.

Other measures being considered

While the full budget announcement on Wednesday will likely bring further announcements, there has been speculation about a number of potential measures the Chancellor could introduce.

Given the current energy supply crisis and the impact on the cost of living, some MPs have urged Sunak to consider slashing VAT on energy bills, particularly over the difficult winter months.

It is also thought that Sunak will look to simplify the taxation system on alcohol, with some calling for him to differentiate the rates for supermarkets and shops compared with pubs, in order to help the entertainment sector.