Rishi Sunak's Budget is 'more Gordon Brown than George Osborne'

In its initial response to the Budget, the IFS said that over the next five years, real household disposable income is expected to grow by 0.8% per year – well below the historical average.

Growth had been weak in the 10 years before Covid, which meant average incomes were now expected to be 28% (£9000 per capita) below the pre-2008 trend.

“The Government is now planning to spend more on public services, and to have a more generous system of Universal Credit than it was intending pre-pandemic," said IFS director Paul Johnson.

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“The increases in Universal Credit for those in paid work are occurring alongside increases in the national living wage.

“This means that the Budget and Spending Review are much more similar to Gordon Brown’s than to George Osborne’s.

“To help fund the spending increases, the Chancellor confirmed big tax rises: this year has seen the biggest set of tax-raising measures since 1993. It now looks like a large part of those tax rises is to be spent rather than being entirely used to reduce borrowing as originally announced.”

He said that if implemented, the measures might be sufficient to push borrowing below what was expected before the pandemic and see debt falling as a share of national income.

“Of course there is huge uncertainty over the outlook for the economy and it remains to be seen whether the tax rises will actually be implemented as announced,” said Johnson.

“The coming year will also be a difficult one for living standards. For example, for middle earners rising inflation and tax rises mean their real take-home pay is set to fall by around 1%.”

Sunak’s plan to lower the Air Passenger Duty (APD) for domestic flights across the UK from April 2023 was, naturally enough, welcomed by the regional group AGS Airports.

A spokesperson for the group said the connectivity they provided was vital to the economic success of the areas they serve and will play a key part in the UK Government’s levelling-up agenda.

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“This is both a welcome and much-needed announcement that comes as we begin the long process of rebuilding our domestic connectivity, which was decimated following the pandemic,” they said.

“Removing the double whammy of having APD charged on both legs of a return trip will strengthen the viability of these important routes, which will get our economy moving again. Now more than ever, it is crucial we provide the connectivity that will drive growth, employment and prosperity.”

The Scottish Property Federation (SPF) said the Budget came against a better than expected economic picture and welcomed extra support for programmes around Scotland which could help unlock new development and economic opportunities.

“While the Chancellor’s announcements on business rates will provide some respite to high streets south of the border, the Finance Secretary has an opportunity to go further in December’s Scottish Budget,” said SPF director David Melhuish.

“Business rates in Scotland must be put on a more sustainable level, with annual revaluations that respond to changing economic circumstances and an end to damaging and counterproductive empty property rates for commercial buildings left vacant by the pandemic.

“Following the Chancellor’s move to use the rates system to boost the transition to net-zero, it will be important that this move is reciprocated in Scotland to help our built environment to decarbonise.”

The country’s oil and gas sector highlighted how companies were continuing to play a central role in driving innovation and skilling up the UK workforce to attract the investment needed to support post-pandemic recovery.

OGUK pointed to the landmark North Sea Transition Deal agreed with the UK Government this year – the first of its kind in any G7 country – as a blueprint to achieve this. T It detailed plans to accelerate homegrown greener technologies like carbon capture and hydrogen, to grow our world-leading supply chain’s low carbon innovation and export potential.

This could deliver investment of £16bn in greener technologies and create 40,000 new jobs in green and greening energy careers.

Deirdre Michie, OGUK chief executive, said: “Throughout the pandemic, UK offshore oil and gas employees helped keep homes and hospitals powered, and the whole country functioning.

“Now our sector has a crucial role to play in supporting the country in its post-Covid recovery, generating affordable low carbon energy and supporting the delivery of the country’s climate ambitions.

“Through our North Sea Transition Deal, we have a blueprint that will help to achieve net zero, while keeping the lights on.”

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Dr Liz Cameron, chief executive of Scottish Chambers of Commerce, added: “Scotland’s businesses are focussed on recovery and overall, most will welcome today’s announcements which go some way towards securing the economic growth and conditions businesses need to bounce back from the devastating impact of the last 18 months due to Brexit and the global pandemic.

“However, businesses are asking whether this Budget goes far enough to tackle the significant issues facing them and whether it aligns with the economic realities on the ground, where supply chain problems, skills shortages and rising cost pressures are undermining growth.”