Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons.
Setting out the government’s tax and spending plans for the year ahead, he announced new measures to help business and jobs through the pandemic and to support the UK’s long-term economic recovery and a series of tax-raising plans to help rebalance the public finances.
Here is a summary of the main points.
- Freezing personal tax thresholds and lowering VAT to 5% for hospitality for 6 months, 12.5% further 6 months and 20% by April 2022. Pensions Lifetime Allowance same, CGT annual exemption same. VAT threshold staying at £85,000. Basic allowance rise to £12,570, as planned, but then stay fixed at that level until 2026.
- Corporation tax increase to 25% by April 2023. Tapered so only companies with profits exceeding £250,000 will pay the full 25%. Below £50,000 get the current 19% rate.
- Super-deduction tax-break for firms that invest reduce tax bill by 130% of what is spent on investment. Current rule will give £2.68m reducer on £10 million equipment spend, under this plan will be £13m. Untried and unproven, but OBR thinks we get 20% boost in investment. This should take us from 30TH in OECD to 1ST for business investment, an unprecedented move anticipated to be worth £25 billion during the two years in place.
- Green Britain – new green infrastructure bank in Leeds, capitalisation £12bn, with £40bn investment. Offshore wind projects Teeside and Humber. A Sovereign Green Bond for savers.
- £150 milllion for local communities to support sports clubs and pubs.
- Stamp Duty Holiday until 30TH September. £500,000 Nil Rate Band now until June 30TH, then £250,000 to end September and back to normal £125,000 by October 1ST.
- 95% mortgages
- Eight Freeports: East Midlands Airport, Liverpool, Felixstowe, Humber, Plymouth, Thames, Teeside, Solent. Special Economic Zones with simple planning regulations, infrastructure incentives, tax breaks and favourable duties to stimulate growth and trade.
- Unsponsored point-only VISAs to attract highly-skilled migrants in Sciences, and R&D and Enterprise Management Incentives to improve productivity and translational research.
- Regional Development Funds and levelling up : £410m Northern Ireland, £1.2bn Scotland, £740m Wales.
To ensure the recovery sustains itself, Sunak is not raising taxes now. He is letting the deficit grow big enough to look after itself – through business investment and workers consuming the extra money in their pockets creating growth and in turn, generating higher tax revenues.
Nothing for the NHS, nothing for pensioners, nothing for the #ExcludedUK small business owners which if half fail then that equates to £18.45bn a year lost in Treasury revenues. They now have poor credit ratings so only those who accessed the Business Bounce Back Loans can access the new business support measures.
The NHS backlog will be formidable, especially for electives. The 19p rise in minimum wage to £8.91 is unlikely to offset the demand-pull inflation from delayed consumption resumes amid fewer places to spend.
Whether these measures will offset the combined impact of post-Brexit and Covid-19 transition back to normal economic affairs is uncertain. To recover, tens of thousands of small businesses will have to be created to replace those that go bankrupt. This budget doesn’t look good for them, the #ExcludedUK. Personal debt will be high. Many will be (or should be) on benefits. Government coffers will be very low. This will mean the freezes on income tax and NICs may not spur the necessary growth we need to pay down our annual deficit. The concept of Freeports is a bold step, much like the super-deduction tax break, but there are risks they become crime harbours facilitating money laundering and allow companies to avoid paying their share of tax. Liverpool was one until 2012 and has seen more activity since leaving that status. The regional funds to level-up the Union will placate them for a while, but as reopening bites expect further calls for greater devolution and independence. Grand measures, now for the execution.