The Chancellor of the Exchequer, Rishi Sunak, set out a £65 billion three-point plan earlier today designed to provide support for jobs and businesses as the UK emerges from the pandemic and embarks on the road to recovery.
He said that his immediate priority is to continue to support those hardest hit, with extensions to furlough, self-employed support, business grants, loans and VAT cuts – bringing total fiscal support to over £407 billion.
Delivering the Budget in Parliament, Mr Sunak continued: “This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people. First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that and third, in today’s Budget we begin the work of building our future economy.”
In line with the Government’s roadmap for the cautious easing of social distancing rules, the Chancellor pledged to keep economic support in place to until the UK completely exits the lockdown.
To protect the livelihoods of those hardest hit, he also revealed that the Coronavirus Job Retention Scheme will be extended to September and the Self-Employment Income Support Scheme (SEISS) will continue with a fourth and a fifth grant.
A new Recovery Loan Scheme will be launched to replace the existing Government guaranteed schemes which have supported £73 billion of lending to date and close at the end of March.
As part of the UK Government’s Plan for Jobs to support, protect and create jobs, the Chancellor is increasing support with £126 million of new money to enable 40,000 more traineeships, and doubling the cash incentive to firms who take on an apprentice to a £3,000 payment per hire. The National Living Wage will be increased to £8.91 from April and there will also be a six-month extension of the £20 per week Universal Credit uplift, with eligible Working Tax Credit claimants receiving a one-off payment of £500.
Meanwhile, income tax personal allowance and the higher rate threshold will rise next year as planned and will then be maintained at that level until April 2026.
To balance the need to raise revenue, the rate of Corporation Tax will increase to 25%, although he said it will remain the lowest rate among the G7 countries. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Mr Sunak said the Budget will spread investment and opportunity across the UK, helping businesses to grow, and improving access to skills, capital and ideas.
He also announced that new English Freeports will be opened at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside and will be special economic zones with different rules to make it easier and cheaper to do business. Combined with changes to immigration rules, the Towns Fund, the UK-wide Levelling Up Fund, and the UK Community Renewal Fund, opportunities for well-paid jobs, innovation and growth will be levelled up across the country.
The Budget coincided with the publication of the Government’s new
Build Back Better: our plan for growth strategy, setting out how infrastructure, skills and innovation will drive the UK economy.
130,000 small- and medium-size businesses will be supported through the new Help to Grow scheme, providing the digital and management tools needed to innovate, grow and help drive recovery.
Beginning April 2021, a new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment meaning they can reduce their taxable profits by 130% of the cost. This is worth £25 billion to companies over the two-year period the super-deduction will be in full effect.
To help progress the Prime Minister’s recently unveiled Ten Point Plan for a green industrial revolution, new port infrastructure will be built to support the next generation of offshore wind projects in Teesside and Humberside. The UK will issue at least £15 billion in green bonds to help finance the transition to net zero and the Government will launch the world’s first sovereign green savings bond for retail investors.
Commenting on the Budget statement, Tony Danker, CBI Director-General, said: “This Budget succeeds strongly in protecting the economy now and kickstarting recovery. It leaves open the question of UK competitiveness long term. The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending.
“Thousands of firms will be relieved to receive support to finish the job and get through the coming months. The Budget also has a clear eye to the future; to ensure finances are sustainable, while building confidence and investment in a lasting recovery.
“The Chancellor has taken a welcome, broad view on how to stimulate growth from the new Infrastructure Bank, to Help to Grow and incentives to take on apprentices. The super deduction should be a real catalyst for firms to greenlight investment decisions. The boldness of the Chancellor on this measure is to be admired.
“But moving Corporation Tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.
“The Government must now have a laser-like focus on the UK’s competitive position in the round, including fundamental reform of the unfair Business Rates system. The UK must remain attractive for every type of business, from the innovation, high-growth UK homegrown firm to the global firms investing in the UK. We look forward to working with the Government to achieve this.”
Stephen Phipson, chief executive of Make UK, said: “Given the difficult circumstances facing the Chancellor, industry will welcome the certainty and clarity he has provided about the route forward. This statement pursues a positive and fair middle road which balances the short-term need to avoid squeezing the recovery before it has started, while avoiding any artificial boost given the inevitable strong bounce-back once the economy begins to open up.
“In particular industry will welcome the extension of the furlough scheme and a clear recognition that we urgently need an investment-led recovery. The promise to consult on further changes to R&D is also welcome and the Government must now move urgently to implement this so further policies to boost levels can be brought forward.
He added: “We must now seize the opportunity provided by new technologies and the drive towards net zero to set out a longer term vision for the economy. This must include a long-term Industrial Strategy which looks ahead twenty years and involves a laser like focus on innovation based on a partnership between the public and private sectors, together with our world class science base.”