finance

How Rishi Sunak’s spending review affects your finances


CHANCELLOR Rishi Sunak unveiled a raft of measures in this afternoon’s spending review designed to help people weather the coronavirus crisis,

New initiatives included a raise to the national living wage, a new three-year Restart Programme to help the unemployed and pay rises for NHS workers.

Chancellor Rishi Sunak unveiled a raft of measures in today's Spending Review

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Chancellor Rishi Sunak unveiled a raft of measures in today’s Spending ReviewCredit: AFP or licensors

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Less positive news includes a raid on pensions costing savers £122bn, as well as probable tax rises next year.

Here we take a look at each of the initiatives announced and explain how they will impact the cash in your pockets:

National living wage rises to £8.91 for workers over 23

One of the core measures announced today was that the National Living Wage will rise to £8.91 per hour from April. It currently stands at £8.72 an hour, meaning an increase of 19p or 2.2%.

The chancellor also announced that the National Living Wage will be expanded to include 23 and 24 year olds. Previously, the national living wage was only available to those aged 25 or above.

Payslips were expected to rise from £8.72 to £9.21 in April next year, but the increase is less than expected due to the coronavirus crisis.

Pay rises for workers under 23

Workers who are younger than 23 do not legally have to be paid the National Living Wage.

Fortunately, the chancellor has also boosted the National Minimum Wages, meaning younger employees will also get a small pay rise.

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People aged 21 and 22 will see their wages bumped up from £8.20 to £8.36, while 18 to 20 year olds’ pay will go from £6.45 to £6.56.

Those aged 16 and 17 will see wages increased from £4.55 to £4.62, while pay for apprentices will be £4.15 instead of £4.30.

Pay rises for the NHS – but wage freezes elsewhere in the public sector

Rishi Sunak also announced that doctors, nurses and other NHS workers will be getting a pay rise from next year.

The Treasury has not yet announced how much salaries will rise by, so we can’t calculate how much better off people will be.

Other public sector workers are in for a more gloomy year as the chancellor announced a pay freeze for 2021.

He said: “Coronavirus has deepened the disparity between public and private sector wages.

“In such a difficult context for the private sector – especially for people working in sectors like retail, hospitality, or leisure, I cannot justify a significant, across-the-board pay increase for all public sector workers.”

Pay rise for public sector works with salaries of less than £24k

Lower income public sector workers will be protected from the public sector pay freeze.

The chancellor announced anyone who earns less than £24,000 a year will still receive a pay rise of at least £250 next year.

Bad news for pensions savers and investors

The Treasury has snuck out a document confirming that the Retail Price Index (RPI) will be scrapped from 2030.

This is catastrophic news for pensions savers including those with a final-salary scheme, people who have bought an annuity and anyone invested in index-linked bonds (gilts).

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In total, the move is predicted to affect six million people, costing Britain’s savers £122billion.

Individuals are likely to lose thousands of pounds from their savings pots.

Higher taxes

Experts say Brits should brace themselves for higher tax rises next year as well as possible spending cuts.

The conservative election manifesto rules out raids via Income Tax, National Insurance and VAT.

This means likely other areas may come under the hammer including the pensions triple lock, pensions tax relief, tax-free cash at retirement, and shareholder dividends.

Tom Selby, senior analyst at AJ Bell, said: “The country faces a colossal financial black hole as a result of COVID-19…

“Just as a huge national effort has been required to slow the spread of the virus, it is inevitable the Treasury will turn once again to citizens to help repair the financial damage wrought by the pandemic.

“That means either tax rises or spending cuts or more likely, a combination of the two.”

Help for the unemployed

Rishi Sunak also unveiled a £2.9bn package to help Brits who are unemployed thanks to the coronaviris crisis.

The concept is to give those who have been out of work for 12 months-plus regular intensive support to suit their circumstances.

But the Treasury estimates the scheme could be successful for only around 300,000, though they claim this will make it worthwhile.

Rishi Sunak revealed NHS pay rise but other public sectors get a freeze





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