As Britain looks to ease out of lockdown three, the Chancellor, Rishi Suank, has set out economic recovery plans in the annual budget. Reflecting on the past year, Sunak stated:
“I said I would do whatever it takes, I have done, and I will do so.”
Amidst the year-long Coronavirus pandemic, Britain’s borrowing level has been the highest ever outside wartime. Being “honest” about the challenges ahead, Sunak has promised that he and the government will fix public finances and put Britain on the road to recovery.
The OBR (Office for Budget Responsibility) has predicted that Britain’s economy will return to its pre-Covid levels by the middle of next year and will grow at a rate of 4%. But what does the Chancellor’s recent announcements men for jobs, businesses and livelihoods?
Crucially, the furlough scheme, which has paid 80% of employee’s wages, has been extended until September 2021. As Britain looks to re-open in July, the Chancellor has pledged that businesses will have to contribute towards 10% of this.
Support for the self-employed will also continue until September.
Universal Credit payments that help with the living costs of low-income families will also continue at £20 a week, but instead, recipients will receive a lump sum of £500.
The Chancellor also announced a rise in the National Living wage to £8.91 per hour, up from £8.72 for workers over 25. This will account for an increase of 19p per hour, totalling £345 in a year for full-time workers.
Sunak recognised the challenges faced by business across the country but said they would need to contribute towards economic recovery. For now, the budget is providing a new re-start grant in April to help as many businesses open as possible. Non-essential retail, which includes clothing shops, bookshops, and other mainstream retailers, will receive £6,000 of support per premises. The hospitality industry, which has been shut for the best part of a year, alongside leisure facilities, will receive up to £18,000.
The business rates holiday usually charged to shops, offices, pubs, warehouses, and factories will stay until June. The rate of 5% VAT (value-added tax) will be extended until September 2021, and will run at an interim rate of 12.5% for six months after that. This will mean prices in coffee shops and pubs will be reduced. Sunak has promised the full rate of 20% will not return until April 2022.
Stamp duty paid when you move or buy a house in the UK has also been frozen for purchases up to £500,000. This will be lowered to £250,000 until the end of September. Sunak also revealed a new scheme for lenders to supply 95% of mortgages to help first time buyers, saying the government wanted to turn “generation rent into generation buy.”
The budget continues to offer Britain’s businesses and workers support. Still, Sunak was clear that he does not believe the state should indefinitely continue to pay for public spending. Even stating, nobody’s take-home pay will be less than it is now and that his tax policy was “progressive and fair.”
Sunak is set to raise business corporation tax to 25% in 2023, which will undo more than half of George Osborne’s (Conservative Chancellor between 2010 to 2016) reduction from 28% to 19%. Businesses will continue to get support for the next year but will face a considerable tax rise in 2023. However, smaller companies and those who make less than £50,000 in profit per year will only pay 19%.
March 2020’s budget was considered unprecedented at the time. However, further still, Sunak continues to unveil support for businesses and jobs during the tail end of the pandemic. Despite remaining optimistic, he warned of the future challenges ahead.
