On March 3rd, 2021, Chancellor of the Exchequer Rishi Sunak presented his annual Budget to the House of Commons. We’ve summarised the 15 key takeaways of the Budget into an easily digestible briefing so that you can stay informed. You can subscribe to receive briefings like this in your inbox each week.
State of the Economy:
- The economy is forecast to return to pre-pandemic levels by mid 2022 with 7.3% growth in 2022, but will remain 3% smaller in 2026 than if the pandemic hadn’t occurred. The Office for Budget Responsibility predicts unemployment to peak at 6.5% next year, far lower than the 11.9% forecast last autumn. Ian Blackford, Leader of the Scottish National Party at Westminster, criticised the 1.7% growth rate from 2024 onwards as showing lack of ambition.
- The UK will borrow a record £355 billion this year, on the way towards £407 billion in total fiscal measures. In a move to appease the Tory backbenches, the chancellor plans to reduce the deficit from 17% of national income to 10% in 2021-22 to balance government debt at 97% of GDP by 2023.
- Furlough is extended until the end of September, with the government continuing to pay 80% of employees’ wages for hours they cannot work.
- Support for the self-employed is extended until September, with an additional 600,000 people now eligible as access to grants is widened.
- A new mortgage guarantee scheme will allow first-time buyers to take on mortgages of up to £600,000 with a 5% deposit. It will be a temporary measure, running from April 2021 to December 2022.
- A new “super-deduction” will cut the tax bill of firms by 25p for every pound they invest in new equipment. Starting in April 2021, this will be worth around £25 billion to UK companies over the two-year period the super-deduction is in full effect.
- Almost £400m has been allotted to help arts venues re-open. A £300m recovery package has been given to professional sport and £25m for grassroots football.
- An additional £2.4 billion is to be given to the devolved administrations for 2021-22. This is £1.2 billion for the Scottish Government, £740 million for the Welsh Government, £410 million for the Northern Ireland Executive.
- NHS workers are to receive a 1% pay rise. At least 1.3 million other public sector staff will have their wages frozen for a year, with the government warning that it is under huge pressure. “Pitiful and bitterly disappointing,” says the Royal College of Nursing (RCN).
- A new £375 million “Future Fund” will be set up to invest in companies working in science. £15 billion of green bonds will be issued to finance projects to tackle environmental challenges.
- Tax-free Personal Allowances are to be frozen at £12,570 from April 2021, dragging 1.3 million people into the first tax band. The threshold for higher-level income tax will also be held at £50,270, meaning a further 1 million will pay the top rate. These so called “stealth taxes” are expected to raise over £19 billion over the course of the government. The cut in the VAT rate for hospitality industries will be extended until October to try and boost trade this summer, before a staggered return to 20%.
- Corporation Tax will increase to 25% of profits, the first raise since 1974. In order to support the recovery, the increase will not take effect until 2023. Businesses with £50,000 or less will continued to be taxed at the current rate of 19%, and a taper will be introduced such that only businesses with profits greater than £250,000 will be taxed at the full 25% rate. This still remains the lowest rate in the G7.
- Fuel duties will be frozen for the 11th consecutive year, and alcohol duties will be frozen for the second year running, saving drinkers £1.7 billion.
- The National Living Wage is to increase from £8.72 an hour to £8.91 an hour from April.
- Eight new freeports are to be created by late 2021 allowing goods to be imported without facing tariffs or charges. The Chancellor hopes they will boost employment and regenerate deprived areas by reducing the costs of doing business.
Written by John Chang, Tristan Hand and Chenyang Li