Image source, .People are scrutinising the details of Chancellor Rishi Sunak’s Budget, to see what it means for them.
Our personal finance correspondent Kevin Peachey – and consumer affairs correspondent Colletta Smith – answers some of your questions:
Will the Budget cause mortgage rates to rise? (John Burnie)
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 – particularly in 2023 – are much more likely.
What does the budget mean for savings? (Louise)
The Chancellor didn’t make any changes to taxes on savings and investments.
Of course the threat of rising inflation was talked about lots, and wouldn’t be good news for investors as they would be able to buy less with whatever money they earn.
But if the Bank of England decides to increase interest rates to combat that inflation further down the line, then savings would increase too.
Image source, .How can the chancellor get away with reducing tax on short haul flights just before the UK hosts COP26? (Marilyn Taylor)
Mr Sunak has already faced a lot of questions and criticism about the timing of his decision – and should expect more.
He argues that lowering air passenger duty on flights between airports in the four UK nations is balanced by increasing the rate of tax from April 2023 on very long-haul flights (over 5,500 miles).
He also says domestic flights account for under 5% of total aviation emissions. In the end, it looks like it was a balancing act for the chancellor between the government’s levelling-up agenda and climate considerations.
Image source, .Was anything mentioned for pensioners and how they are going to manage this winter? (Sandie Parkin)
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.
Why are some of the chancellor’s changes dated from 2023? A lot can change by then. (Paul Amphlett, Sandhurst)
Indeed it can, but long-term policy announcements in a Budget are nothing new. The shake-up of alcohol duty, for example, is quite complex and will need to go through a consultation and scrutiny process before its planned introduction in 2023.
The National Living Wage is rising, but how much will that be offset by the increase in National Insurance and changes to Universal Credit rules? (Peter Ovenstone, Peterhead)
That is a good question, but a tricky one to answer because people in different circumstances will be affected differently.
Economists at the Institute for Fiscal Studies say the policies taking effect will ultimately be progressive. In other words, good for low earners. For those without a job though, the outlook is much more precarious.
Was there any mention of the self-employed in the budget? (Ann, Lincolnshire)
The government’s big pre-announced policy change – raising the rate of national insurance – will apply to both employed and self-employed people earning more than £9,568.
Image source, .Aside from that, some had feared there would be tax increases for the self-employed to cover the cost of support given during the pandemic. Others were calling for some of that pandemic funding to be extended for those who work for themselves.
But the chancellor took neither route, choosing instead to say very little about the self-employed.
Has the student loan threshold been lowered, as rumoured prior to the budget? (Stephen, Blyth)
No. Despite all those rumours, he didn’t mention student loans at all.
What are your questions on the Budget?
