On March 3rd, the Chancellor presented our 2021 Budget- the government’s tax and spending plans in the next phase of tackling the virus, protecting jobs, and helping our economy grow again.
The pandemic has been a huge hit on our economy, requiring our government to borrow £355 billion, the largest amount since WWII. But thanks to a support package of over £407 billion over this year and next, one of the most generous in the world, the future of our economy, and our recovery, is looking positive. According to the Office for Budget Responsibility (OBR), our economy is expected to return to pre-Covid levels by June next year. Growth is forecast to be faster, unemployment lower, and wages, investment and household income higher than expected in November last year.
I am pleased to see the extension and expansion of a number of support schemes including furlough and support for the self-employed. But as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing to rise unchecked. That is why the government must ask large, profitable companies to play their part by paying more tax. If we take these actions, the OBR forecast that in five years’ time, debt should be broadly stable.
The Chancellor’s three-pronged approach to recovery is as follows:
1: Protecting Jobs and the Livelihoods of the British People
- Extending the Furlough scheme until the end of September, meaning employees will continue to receive 80% of their current salary for hours not worked.
- The Self-Employed Income Support Scheme will also be extended, with a 4th grant covering February to April, and a 5th grant from May.
- Doubling apprentice payments to £3,000 for all new hires, of any age.
- Restart Grants to help businesses reopen and get going again. Non-essential retail businesses can receive grants of up to £6,000, and hospitality and leisure businesses can apply for grants of up to £18,000.
- £300 mil additional funding for the Culture Recovery Fund, to support the reopening of arts, culture and sporting institutions.
- A new Recovery Loans Scheme, allowing businesses of any size to apply for loans from £25,000 to £10 mil, through to the end of this year.
- A 100% business rates holiday will continue to the end of June, and for the remaining nine months of the fiscal year, business rates will be cut by two thirds.
- 5% reduced rate of VAT for hard hit sectors extended for six months to the 30th September, followed by a 12.5% rate for another six months.
- Stamp Duty cut extended by three months up to June 30th.
- Government will offer lenders the guarantee they need to provide 95% mortgages.
- The £20 uplift to the Universal Credit will continue for a further six months, and the National Living Wage is increasing to £8.91 from April.
2: Beginning to Fix the Public Finances
- In 2023, the rate of Corporation Tax, paid on company profits, will increase to 25%. Small businesses will be protected by the Small Profits Rate, maintained at 19% for businesses with profits of £50,000 or less.
- Income tax, national insurance and VAT will not be raised. Instead, we are freezing personal tax thresholds until next year, when we will raise it to £12,570 until April 2026.
- A new Taxpayer Protection Taskforce will be set up to crack down on COVID fraud.
- The Super Deduction makes our tax regime for business investment world-leading, lifting us from 30th in the OECD to 1st. For the next two years, we are allowing businesses to claim 130% of their new machinery cost as a tax cut.
- Planned increases in alcohol duties will be cancelled, applying to Scotch whisky, wine, cider and beer.
- Planned increase in fuel duty will also be cancelled.
3: Building our Future Economy
- Help to Grow Management will help thousands of SMEs get world-class management training at leading business schools, at the cost of only £750 per business, 10% of the unit cost. Small businesses will also be helped to develop digital skills with free expert training, and a 50% discount on new productivity-enhancing software.
- New visa reforms will be introduced aimed at highly skilled migrants, including a new unsponsored points-based visa to attract the best and most promising international talent in science, research and tech, and an improved visa process for scale-ups and entrepreneurs.
- We are launching a new Future Fund Breakthrough to help fill the scale-up funding gap.
- Eight new Freeport locations will encourage free trade and reinforce our position as an outward-looking trading nation, open to the world.
- We are investing in offshore wind port infrastructure in Teesside and Humbershire, and launching the first ever UK Infrastructure Bank – located in Leeds – to invest in public and private projects, drive green growth and create green jobs.
There is more about the Budget 2021 on the Government website: https://www.gov.uk/government/news/budget-2021-what-you-need-to-know