Today’s Budget comes at a critical time for our country. One year ago, the Government promised the British people that it would do whatever it took to provide security and stability through the unprecedented Covid-19 pandemic. This promise is being delivered, with the Government providing £407 billion of support to individuals and businesses - more than almost any other country in the world.
It is welcome news that this approach is working, with the Office for Budget Responsibility (OBR) now expecting the UK economy to recover to its pre-crisis level six months earlier than originally thought and unemployment to peak at 6.5% instead of the nearly 12% feared last summer.
It is thanks to the Conservative Party’s record on the economy over the past decade, having reduced the deficit by over 80% before the pandemic and helped 3.4 million more people into work, that we came into this crisis in a strong position and were able to provide such a large fiscal support package.
However, the damage Covid-19 has done to our economy has been acute. Since March, 700,000 people have lost their jobs, the economy has shrunk by 10% – the largest fall on record – and borrowing is at the highest level it has ever been outside of wartime.
That is why today’s Budget introduced a three-part plan:
- Supporting people and businesses through the pandemic
- Beginning to fix the public finances
- Building our future economy
I hope that the following summary of the Chancellor's key announcements is helpful to local residents.
Supporting People and Businesses through the Pandemic
To achieve this, the Government is:
- Extending furlough until the end of September. Employees will continue to receive 80% of wages for hours not worked. However, as businesses reopen, they will need to contribute 10% of wages in July, and 20% in August and September.
- Introducing two further grants for the self-employed and extending eligibility to those who became self-employed last year. The first of these grants will cover the period February-April and be worth 80% of average monthly revenues. The second will be made available from May and will be worth 80% of average monthly revenues to those whose turnover has fallen by more than 30%, and 30% to those whose turnover has fallen by less than 30%. Eligibility for these grants will be extended to those who filed their first tax return for the 19/20 year by 2 March.
- Introducing restart grants of up to £18,000 for retail, hospitality and leisure businesses. Non-essential retail businesses will receive grants of up to £6,000, while hospitality and leisure businesses – including personal care, hairdressers and gyms – will receive grants of up to £18,000.
- Providing an additional £425 million discretionary funding to local councils. This funding is intended to support non-retail, hospitality and leisure businesses.
- Extending the business rates holiday for retail, hospitality and leisure businesses. The current 100% holiday will be extended until June, before being cut by two-thirds for the remainder of the year, up to a maximum £2 million per business.
- Extending the 5% reduced rate of VAT for the hospitality and tourism sector. The reduced rate will be extended until the end of September before being increased to 12.5% until the end of March. At this point, it will return to the normal 20%.
- Extending the Stamp Duty cut. To avoid purchases not completing in time for the end of March, the £500,000 nil rate band will end on 30 June, before tapering down to £250,000 until the end of September. At this point, it will return to its normal level of £125,000.
- Introducing 95% mortgage guarantees for prospective homebuyers. From April, lenders who commit to providing loan-to-value ratios of between 91%-95% can get a government guarantee on the full value of those mortgages.
- Extending the temporary £20 uplift to Universal Credit and Working Tax Credits. The uplift will be extended for a further six months. Working Tax Credits claimants will receive their equivalent of 6 months of support through a one-off payment of £500.
- Increasing the National Living Wage to £8.91 per hour from April. The National Living Wage will also be extended to people over 23 years old.
- Providing additional funding for apprenticeships and traineeships. The incentive payment to small businesses to take on apprentices of any age is being doubled to £3,000, and £126 million is being provided to triple the number of traineeships next year.
- Introducing Recovery Loans. These loans will replace the existing Covid-19 loan schemes and will enable businesses to access loans between £25,000 to £10 million, with an 80% government guarantee.
- Providing £700 million for arts, culture and sports institutions. A new apprenticeship pilot scheme for creative industries is also being introduced and the £500 million Film and TV Production Insurance Restart Scheme is being extended.
Beginning to Fix the Public Finances
To achieve this, the Government is:
- Increasing corporation tax to 25% from April 2023. This rate will only apply to businesses with profits greater than £250,000. A Small Profits Rate will be created, maintained at the current rate of 19%, for businesses with profits of £50,000 or less, and a taper will be introduced for profits between £50,000-£250,000. Tax loss carry backs will be extended from 1 to 3 years, and the 8% bank surcharge will be reviewed.
- Introducing a Super Deduction on capital investment. For the next two years, companies which invest can reduce their tax bill by 130% of the cost of that investment.
- Increasing personal tax thresholds. Personal tax allowances will rise in line with inflation to £12,570, but will then be maintained at this higher level until April 2026. Similarly, the Higher Rate will also increase next year to £50,270 and be maintained at this level until April 2026.
- Maintaining Inheritance Tax, Capital Gains Tax, Pensions Lifetime Allowances and the VAT threshold at current levels. The Inheritance Tax-free thresholds will remain at existing levels until April 2026. The Lifetime Allowance will be maintained at just over £1 million until April 2026. The VAT threshold will remain at £85,000 for 2 years from April 2022.
- Maintaining current rates of Income Tax and National Insurance Contributions. This was a commitment made in the Conservative Party Manifesto and the Government is committed to keeping it.
- Freezing alcohol duty and fuel duty. The duty rates on beer, cider, wine and spirits will be frozen for another year, and fuel duty will be frozen for the eleventh consecutive year. Future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050.
- Investing £100 million to tackle Covid-19 business loan fraud. A new Taxpayer Protection Taskforce will be created within HMRC, with 1,000 investigators seeking out and penalising fraud in the loan schemes.
Building our Future Economy
To achieve this, the Government is:
- Launching a £150 million Community Ownership Fund. This fund will help communities buy local assets such as pubs and theatres.
- Opening bidding for the Levelling Up Fund. This £4.8 billion Levelling Up Fund will support town centre and high street regeneration, local transport projects, and cultural and heritage assets.
- Announcing the locations of eight freeports, including one at East Midlands Airport. Freeports will encourage free trade and bring investment to all regions of the country through lower taxes and cheaper customs.
- Launching a Help to Grow scheme this Autumn to boost the productivity of small businesses. Under the Help to Grow: Management scheme, SMEs will be able to access world-class management training through government-funded programmes delivered through business schools, with businesses asked to contribute only £750 (10% of the overall cost) towards the course. Under the Help to Grow: Digital scheme, SMEs will be able to apply for a voucher entitling them to 50% off the purchase of new productivity-enhancing software, up to a total of £5,000 each.
- Launching a wide-ranging consultation on Research and Development (R&D) Tax Credits. This review will consider all elements of the two R&D tax relief schemes, with the objective of ensuring that; the UK remains a competitive location for cutting edge research; the reliefs continue to be fit for purpose; and taxpayer money is effectively targeted.
- Launching a call for evidence on the Enterprise Management Incentive scheme. The Government would like feedback on whether and how more UK companies should be able to access EMI to help them recruit and retain the talent they need to scale up.
- Giving the pensions industry more flexibility. This will ensure high growth firms have access to capital to unlock billions from pension funds into innovative new ventures.
- Launching a new £375 million Future Fund Breakthrough. Building on the Future Fund, this new direct co-investment product will support the scale up of the most innovative, R&D-intensive businesses. The British Business Bank will take equity in funding rounds of over £20 million led by private investors to ensure these companies can access the capital they need to grow and bring prosperity to communities across the UK.
- Introducing visa reforms to attract highly-skilled migrants to the UK. These reforms will include an unsponsored points-based visa and a visa processes for scale ups/entrepreneurs.
- Creating green jobs. Investment will be made in offshore wind port infrastructure, a new environmental retail savings product will be introduced to build on the world-leading sovereign green bond, and the first ever UK Infrastructure Bank will be launched to invest in public and private projects, drive green growth and create green jobs.
The Budget documents can be found here.
The Chancellor’s speech can be found here.
If you would like any further information about anything I have mentioned above, please do send me an email at: jane.hunt.mp@parliament.uk
