What's in the Budget for pensioners this winter?published at 12:27 British Summer Time 28 October 2021

12:27 BST 28 October 2021

Sandie Parkin asks...

Kevin Peachey
Personal finance correspondent

This was a tough Budget for pensioners, owing to the absence of specific policies for them.

We already knew that the state pension will go up by 3.1% next April. It would have been much higher had the government not decided to temporarily end its triple-lock promise.

But with prices predicted to rise at a rate of 4% a year, that becomes a real-terms cut in income. Also, the chancellor chose not to extend current support for low-income pensioners with their energy bills.

• What's the pension triple lock and why's it been suspended?

Will the Budget cause mortgage rates to rise?published at 12:15 British Summer Time 28 October 2021

12:15 BST 28 October 2021

John Burnie asks...

Kevin Peachey
Personal finance correspondent

Image source, Getty Images

Mortgage rates have been very low by historical standards in recent times - and that is partly why there has been such high demand for homes during the pandemic.

The cost of living (as measured by inflation - the rate at which prices go up) is forecast to rise by 4% next year. Normally, you would expect inflation to be controlled by higher interest rates, which often lead to higher mortgage rates.

But at the moment, prices are going up for very specific reasons - such as rising energy bills. And ultimately, it is up to the Bank of England - not the chancellor - to decide whether interest rates need to go up.

The government's independent forecaster, the Office for Budget Responsibility, says if inflation rises by more than 5%, which is possible, then a higher Bank rate and more expensive mortgages are much more likely.

Image source, Getty Images

One of the eye-catching announcements from yesterday's Budget was the change to taxes on alcohol - but are drinks becoming cheaper or more expensive?

There's not one answer to that.

Taxes on sparkling wine, draught beer and cider are to be cut - but will rise for stronger drinks such as red wine.

The new system, due to start in 2023, will mean higher duty for stronger alcohol.

The duty premium on sparkling wines will end and the duty on draught beer and cider served in pubs will be cut.

You can read more about the announcement here.

Robert Cuffe
BBC head of statistics

The government’s spending watchdog, the OBR, says that the average disposable income is set to fall in real terms next year.

That means that, once you’ve paid your larger tax bill and taken account of rising prices for petrol and other things, your earnings will buy you a little less than they did this year.

The chart below shows that this dip is temporary, less steep than the falls experienced in 2020 and shallower than the OBR expected only six months ago.

But it still bodes for a tough few years for living standards.

Image source, PA Media

Two million people could be better off due to changes to universal credit in the Budget.

But another two million claimants will see no benefit because they either don't work or don't earn enough.

One mother who won't see a benefit says she feels "ignored from this Budget - and through most Budgets".

A few years ago, the woman - who doesn't want to be named - was widowed with two young children, and has found it hard to find work.

"Ever since we've moved onto universal credit, we've been capped", she says. "The cap means that we only receive a certain amount of money on universal credit because I'm unemployed.

"I don't think the government values us at all, they see us as just a mass of people taking money from the state.

"In my case, you're punishing my children as well as me for not being able to work."

Read more: How is universal credit changing?

Universal credit has been hitting the headlines after the government faced criticism for cutting the weekly extra £20 given to claimants during the pandemic.

But what changed yesterday?

The chancellor said he would reduce the taper rate of universal credit.

This affects the amount of money lost by working claimants if they earn more through work.

Currently, the taper rate is 63%, which means if you earn an extra pound you lose 63p in benefits.

Sunak plans to reduce this to 55%.

What does that mean in reality?

The £20 weekly cut meant every one of the 5.8 million people on UC lost around £1,000 a year.

The new taper rate would reintroduce a similar amount for 40% of those who work and claim the benefit.

What has the response been?

Tory MPs welcomed the announcement; Labour did not.

Director of the Resolution Foundation think tank, Torsten Bell, said he thought the move would improve the welfare system. But he warned it would help better off UC claimants, while giving nothing to the poorest to compensate for the recent £20 cut.

Read our explainer here.

What was missing for health in the Budget?published at 11:15 British Summer Time 28 October 2021

11:15 BST 28 October 2021

Nick Triggle
Health Correspondent

The headline figure in the Budget was £44bn extra for health in England over the course of the Parliament.

It will mean by 2024-25 the Budget for the Department of Health and Social Care will have risen to more than £177bn, equivalent to 4% more a year.

As heavily trailed in advance, this includes more capital spending – to pay for equipment and new facilities – and a boost for spending on the frontline to cope with the extra pressure on the NHS caused by Covid, including a growing backlog in people waiting for operations and other non-emergency treatment.

But the concern among those working in the health service is there is no clear plan for how the extra staff are going to be found to provide more care.

There are more than 90,000 vacancies in the NHS at the moment, meaning 7% of posts are unfilled.

This is slightly better than it was before the pandemic.

It appears lots of staff who were due to retire put that off to work during the pandemic so the fear is the picture could soon start to worsen.

For a health system that already has fewer doctors and nurses per head than many of our western European neighbours, that could make the government’s ambitions for the NHS hard to achieve.

Image source, PA Media

We've got a bit more from Paul Johnson, director of the Institute for Fiscal Studies, which has just published its analysis of the Budget.

Johnson says if Rishi Sunak is to achieve his ambition of bringing down taxes and reducing the size of the state "then he is going to have to come up with some pretty new and radical ways to manage those pressures".

He says: "He would be helped by an economy growing rather more enthusiastically than it has managed for some time now.

"Finding the key either to reforming public services to make them cheaper and more efficient, or to getting higher economic growth, are challenges which have defeated most of his predecessors."

Johnson says if current forecasts are correct then the chancellor could be in line for a pre-election giveaway of "perhaps £7bn and still maintain some fiscal headroom".

He adds: "But, given his newly stated fiscal targets, it's not a huge or comfortable cushion."

Analysis: What was left out of the Budget?published at 10:45 British Summer Time 28 October 2021

10:45 BST 28 October 2021

Kevin Peachey
Personal finance correspondent

As we all digest what is in the Budget documents, it is always worth considering some of the measures that are striking by their absence.

Firstly, most households are facing hefty energy bill rises, but - despite some speculation - there is no extra help for low-income people beyond existing support.

One charity says residents are being “left in the cold” by the chancellor.

The build-up to every Budget in recent times includes talk of reforms to capital gains tax and pension tax relief. As before, neither see wholesale reform this time.

And graduates will be breathing a sigh of relief that the earnings level at which they start to repay their loans is not being changed, despite speculation it would be lowered.

Image source, Reuters

Since it began, pandemic has influenced nearly every part of our lives - but how much did Covid influence Rishi Sunak's Budget plans?

Paul Johnson, from the Institute for Fiscal Studies think tank, says "in truth, it was his own choice".

“We’re looking forward here to his plans for three or four years’ time. And the forecasts are - remarkably - that the pandemic will have had not much effect, actually, on the size of the economy in three or four years’ time," he tells the BBC.

“So what he’s done is used the pandemic as cover, for what I think was probably necessary: a big increase in NHS spending… and undoing some of the very, very big cuts that we’ve seen to the justice system, the further education system, the school system and so on over the last decade.

“What he’s done is say ‘I’ve got to do this because of the pandemic’ but in reality, changing demographics, the impact of the cuts over the last decade and so on meant that he needed to do quite a lot of this.

“These are - in the end - his and the government’s choices, not things he had to do because of the pandemic.”

In particular, the IFS says middle-income families are "likely to be worse off next year" than they are currently.

"Over the next several years a combination of tax increases and high inflation will mean very slow growth in living standards," the think tank says in its analysis of the Budget.

"A middle earner is likely to be worse off next year than this as high rates of inflation and tax rises more than negate small average wage increases.

"This of course comes on top of a decade of historically feeble increases in real incomes."

The highly-respected and independent Institute for Fiscal Studies think tank has just published its analysis of the effects of yesterday's Budget.

In it, the IFS questions whether Rishi Sunak's optimistic tone will match the economic reality for the UK public.

The IFS says: "High inflation, rising taxes, and poor growth, still undermined more by Brexit than by the pandemic, will see real living standards barely rising and, for many, falling over the next year​."

It adds: "The gap between what we might have expected on the basis of pre [2008] financial crisis trends and what is actually happening is staggering.

"Average gross earnings could have been some 40% higher had pre-crisis trends continued."

If you missed her earlier, here's shadow chancellor Rachel Reeves telling BBC Breakfast that Rishi Sunak's Budget is not what she would have delivered.

We've got more from Rishi Sunak now.

He has defended his decision to cut air passenger duty (APD) for domestic flights in this year's Budget - days before the UK hosts a UN climate change conference.

Speaking to BBC Breakfast, the chancellor is asked if it could lead to people taking more carbon-heavy flights across the UK rather than trains.

He says: "What we're doing here is returning to a system we used to have before we had to get rid of it, which was not paying air passenger duty on both of the legs of a journey that you took within the UK."

Sunak emphasises "it's right that we are consistent with our environmental goals".

He says: "Aviation in general only accounts for about 8% of our overall emissions, and of that 8% a fraction - just 4% or 5% - comes from domestic aviation, so it is a tiny part of our emissions.

"So, yes, we're doing this to support domestic aviation, and regional airports will benefit from this, but we are also introducing a brand new band for ultra long-haul travel.

"Those who fly the furthest will pay the highest rates of APD, that's consistent with our environmental objectives, that's a new band that will come into force, and, actually, yesterday the independent watchdog said that our plans in the round will reduce carbon emission and move us further along the path to net zero."

More from shadow chancellor Rachel Reeves now, who has been telling BBC Breakfast what she would have done differently if Labour was in government:

1. No "tax cut for bankers" - she says yesterday's announcement of a reduction in the levy on banks' profits amounts to a tax cut of £1bn a year compared to what they were going to be paying under previous plans.

2. No cut to air passenger duty on domestic flights - Reeves says it's "astonishing" that the government is prioritising air travel over train travel the week before the major climate summit COP26.

3. "I'd be doing much more to get a grip of some the wasteful spending," she says, citing "£3.5bn in contracts to friends and donors of the Conservative Party [and] the Test and Trace system, worth £37bn, that the Public Accounts committee said treated taxpayers like they were an ATM".

We've been hearing a lot about pressures on the cost of living recently - and it looks set to continue.

The government's forecaster - the Office for Budget Responsibility (OBR) - has warned the cost of living could be set to rise at its fastest rate for 30 years.

Its latest forecast predicts inflation, which measures the change in the cost of living over time, is set to jump from 3.1% to an average of 4% in 2022.

However, the OBR says figures released since its report was compiled suggest inflation could hit almost 5%.

The UK's exit from the European Union has exacerbated supply chain problems such as hold-ups at ports or with deliveries, the OBR says in its latest report, external.

It also says the fact that the energy price cap has risen is a big factor behind the rising cost of living. The cap sets the maximum price suppliers in England, Wales and Scotland can charge domestic customers on a standard - or default - tariff.

The independent forecaster suggests that had its figures been more up-to-date, its inflation forecasts would have painted an even more bleak picture for consumers and businesses.

Image source, EPA

Chancellor Rishi Sunak spent 70 minutes delivering his Budget statement in the Commons yesterday - and this morning he's been speaking the BBC about the decisions he announced.

On Labour's accusation that he did not address issues with rising prices for food, fuel and energy, he tells BBC Radio 4's Today programme he does not have a "magic wand" to make cost of living pressures disappear.

Asked about the impact of inflation - expected to pass 4% and last a year or more - and price increases, he says: "I addressed inflation yesterday in the Budget speech, and I know people will have concerns about that and I wanted to provide a bit of an explanation and some reassurance on what was going on.

"It is largely down to two global forces: one is the impact of rapidly reopening economies putting pressure on global supply chains and the other factor is, of course, energy prices.

"I wish I did but I don't have a magic wand that can make those global challenges disappear, they are going to be with us for a little while."

Image source, PA Media

Usually, it is the responsibility of the leader of the opposition - in this case, Sir Keir Starmer - to respond to a chancellor's Budget.

Yesterday, however, Starmer had to withdraw with minutes to spare after he tested positive for Covid-19 and had to isolate.

Shadow chancellor Rachel Reeves was forced to step in - so how much notice did she get?

"It was quite a day yesterday," she tells BBC Breakfast. "At 11:45, so 45 minutes before the start of the Budget debate, I was told that Keir Starmer had tested positive for Covid and then I had 45 minutes to get ready to respond to the chancellor.

"My background is working as an economist and I certainly put that to good use in those 45 minutes of prep time."

She adds: "Not much time to prepare but I hope I did a good job subbing for my boss."

Laura Kuenssberg
Political editor

A big Budget and a significant statement of intent.

Rishi Sunak portrays himself as a light touch Tory - who doesn't like heavy taxes, who doesn't like big government.

But he's not using the fading of the pandemic emergency to call time on hefty spending.

Nor is the chancellor seizing a moment to argue for a leaner state.

Despite dangling the promise of tax cuts by 2024, the Budget seems to confirm the political conclusions of Mr Sunak and Boris Johnson - vows to shrink the state are not going to win them the next election.

But with the threat of inflation, higher taxes and puny, if better growth, the seeming largesse may not be toasted by the public in the months to come, even if they could so with cheaper cider or prosecco.

Read more from Laura here.

Image source, PA Media

Shadow chancellor Rachel Reeves says the cost of living is still a real challenge for families and pensioners around the country after Sunak’s Budget.

She welcomes the increase in spending on public services “after the last 10, 11 years of austerity”.

But she says people on low and modest incomes are seeing their incomes cut while the price of gas, electricity, fuel and food increases.

“This is a worrying time for many families,” she tells BBC Breakfast.

And she describes the changes to universal credit as "a case of giving with one hand, and then taking much more with the other".

"The key thing for me is about tackling the cost of living crisis for families and pensioners are going to be experiencing this winter."

Reeves says the chancellor should have cut VAT on gas and electricity bills from 5% to 0% for the next six months to help with this.

The shadow chancellor says her priority would have been to tackle the "cost of living crisis".