By Samuel Indyk
Investing.com – The UK Chancellor of the Exchequer Rishi Sunak is set to announce the latest fiscal measures on Wednesday while the Office for Budget Responsibility (OBR) will provide forecasts for the UK economy over the coming years.
When is it?
Sunak is scheduled to begin presenting the Budget at 12:30BST in the House of Commons, just after the end of Prime Minister’s Questions.
What to expect from the Chancellor
A number of stories about what Sunak’s budget contains have already leaked or been announced, much to the annoyance of the Speaker of the House, Lindsay Hoyle.
One of the key points that has already surfaced is a rise in the National Living Wage from £8.91 to £9.50. The increase is due to come into effect from 1st April 2022. For those working a 40 hour week, that equates to a salary of £19,760 per year.
However, with inflation on the rise in the UK, the real increase may be less than people expect.
“Rising inflation will also blunt the real-terms value of this minimum wage hike,” said Tom Waters, Senior Research Economist at the Institute for Fiscal Studies, “and of course while prices are rising now, the increase in the minimum wage won't kick in until April.”
Housing
The Treasury is set to allocate £1.8 billion for building 160,000 new homes on derelict or unused land in England. Homebuilders listed in the UK that could be set to benefit include Persimmon (LON:PSN), Berkeley Group (LON:BKGH), Vistry Group (LON:VTYV), and Taylor Wimpey (LON:TW).
Fuel Duty and Household Energy
The fuel crisis that gripped the UK in September has subsided for now with queues at the petrol pumps no longer observed. It is expected that fuel duty will be frozen for the 12th consecutive year.
On household energy, the spiralling gas costs have prompted the opposition Labour party to call for a cut in the VAT paid on household energy bills to help households get through an expected tough winter. However, the BBC reported that Sunak is unlikely to cut the VAT on household energy bills as such a move would be “poorly targeted”.
Transport
The government has pre-announced that England’s city regions £6.9 billion to spend on train, tram, bus, and cycle projects. When details are announced, keep an eye on FirstGroup (LON:FGP), Stagecoach (LON:SGC) and National Express (LON:NEX), who all provide bus and/or train services throughout the UK.
Healthcare
One of the big policies that has already been announced is news that NHS England would receive £5.9 billion to fix the backlog of patients waiting for tests and scans.
Sin Taxes
Other things to be looking out for include beer and wine duty and tobacco taxes. An increase in beer and wine duty could hurt an already ailing pub sector that includes companies such as J D Wetherspoon (LON:JDW), Marston’s (LON:MARS) and Mitchells & Butlers (LON:MAB). Over 100 MPs from the Conservative party have written to Sunak requesting a freeze in most alcohol duties.
Tobacco names listed in the UK include British American Tobacco (LON:BATS) and Imperial Brands (LON:IMB).
Gambling names could also be in focus if the government announces further measures to crack down on gambling addiction. UK-listed companies in the sector include Entain (LON:ENT), 888 Holdings (LON:888), and Flutter Entertainment (LON:FLTRF).
Economic Forecasts
The OBR will release its forecasts for the UK economy which provide the framework and guidelines for the Chancellor to work with. Since the last batch in March, the UK economy has done a little better than previously thought, with borrowing around £32 billion lower than where the OBR expected previously.
Meanwhile, focus for consumers could be on the OBR’s inflation outlook, according to AJ Bell Head of Investment Analysis Laith Khalaf.
“The OBR’s inflation expectations will also be a key factor in the health of the public finances, and of course of wider interest to consumers and businesses, who are already experiencing price rises,” Khalaf said.
“The budget watchdog thought CPI inflation would undershoot the Bank of England’s target at 1.5% for 2021 and 1.8% for 2022.
“The latest reading of CPI inflation was in fact 3.1%, and the Bank of England has forecast inflation of 4% this winter, and that was before the recent surge in energy prices."
It is fair to assume that the OBR will be bumping up their forecasts for inflation by quite a margin.