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To play this video you need to enable JavaScript in your browser.Media caption, Rishi Sunak: “Today’s Budget delivers a stronger economy for British people”

Chancellor Rishi Sunak has set out changes to universal credit he says will give low income families an extra £1,000 a year.

In an upbeat Budget speech, he said the UK economy had not been hit as hard by the Covid pandemic as expected.

He promised more money for schools, business rate cuts and took 3p off the price of a pint of beer.

Labour said his universal credit measure would not make up for axing the £20-a-week top-up to the benefit.

The chancellor painted a positive picture of the health of the UK economy as it emerges from the pandemic, in his autumn statement to a packed House of Commons.

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"Employment is up. Investment is growing. Public services are improving. The public finances are stabilising. And wages are rising," he told MPs.

"Today's Budget delivers a stronger economy for the British people: stronger growth, with the UK recovering faster than our major competitors."

He said unemployment had not hit the levels feared at the height of the pandemic – but inflation was set to rise further, from 3.1% to 4% over the next year.

Much of his Budget had been pre-announced, but new measures included:

  • A real-terms rise in spending for every government department
  • A freeze on fuel duty
  • Funding per pupil in England's schools is to be restored to 2010 levels over the next three years
  • An extra £2.2bn for courts, prisons and probation services, including £500m to reduce courts backlogs
  • A cut in air passenger duty for internal UK flights
  • More support for industrial research and development

The teetotal chancellor also announced plans to "radically simplify" alcohol tax, so that it was based purely on the strength of the drink.

Taxes on sparkling wine, draught beer and cider are to be cut, but will rise for stronger drinks such as red wine and "white ciders", from 2023.

And in a move aimed at saving pubs from closure, the duty on draught beer and cider will be cut by 5%, about 3p a pint.

He also announced that the planned increase in duty on spirits, wine, cider and beer due to take effect from midnight on Wednesday has been cancelled.

And he scrapped next year's planned increase in business rates in England and promised more frequent revaluations, and tax breaks for firms that make improvements to their properties, from 2023.

In further moves to boost the leisure industry as it emerges from the pandemic, he announced a 50% business rate discount for pubs, cinemas, restaurants, gyms and other venues.

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To play this video you need to enable JavaScript in your browser.Media caption, Rachel Reeves says some families and businesses will not recognise the UK described by the chancellor in his Budget

The chancellor waited until the end of his 70 minute speech to announce changes to universal credit, which come after a widely condemned £20-a-week cut to the benefit earlier this month.

The universal credit "taper" will be cut, so that instead of losing 63p of benefit for every £1 earned above the work allowance, the amount will be reduced to 55p.

The amount people can earn before starting to lose the benefit will also increase by £500 a year. The new rate will be introduced by 1 December, he told MPs.

"This is a tax cut next year worth over £2bn," said the chancellor.

"Nearly two million families will keep, on average, an extra £1,000 a year."

Shadow chancellor Rachel Reeves said Labour welcomed the move but said it would not make up for the £6bn cut from universal credit earlier this month, which affected five million families.

"Even after this reduction, working people on universal credit still face a higher marginal tax rate than the prime minister. And those unable to work – through no fault of their own – still face losing over £1,000 a year," she said.

The opposition leader normally responds to the chancellor's Budget speech, but Labour leader Sir Keir Starmer is self-isolating after testing positive for Covid.

Ms Reeves, who was drafted in to replace him at the last minute, said Mr Sunak had "no coherent plan" to deal with cost of living crisis facing many families, with rising energy bills and tax increases.