Bold and audacious. That’s the conclusion from many following the Chancellor Rishi Sunak delivery of his first Budget in the House of Commons today. Against the backdrop of an escalating Coronavirus crisis, which threatens to impact global economies, we review the Government’s tax, spending and borrowing plans for the year ahead.
Coronavirus response
Mr Sunak set out a three point plan to deal with the economic impact of Coronavirus. With the package of measures totally £30bn.
- He made a commitment to the NHS to get “whatever extra resources it needed’ to combat Coronavirus. With an emergency response fund of £5bn to support the NHS and other public services
- Statutory sick pay will be paid to everyone who is advised to self-isolate, even if they do not have symptoms
- Self-employed workers, who are not eligible for sick pay, will be able to claim a contributory Employment Support Allowance
- Firms with less than 250 staff will be refunded in full for sick pay payments for two weeks
- Banks will offer “business interruption” loans of up to £1.2m to small businesses and the government will cover their losses of up to 80pc. A £500bn “hardship fund” will be provided for local authorities.
- Business rates in England will be abolished for firms in the retail, leisure and hospitality sectors that have rateable values below £51,000
Personal taxation, wages and pensions
- The National Insurance Contributions tax threshold will rise from £8,632 to £9,500 – saving 500,000 employees just over £100 a year
- The “tampon tax” will be scrapped from 2021 while the planned increase in spirits duty will be cancelled.
- The planned rises in beer duty will be ditched and it will be frozen on cider and wine.
- Fuel duty will be frozen for a 10th consecutive year.
- Tax paid on the pensions of high earners, including doctors, to be recalculated
Business, digital and science
- The Chancellor increased employment allowance to £4,000 and announced that investment in research and development will increase to £22bn per year
- An extra £900m is to be made available for research into nuclear fusion, space and electric vehicles.
- Firms that are eligible for small business rates relief will get a £3,000 cash grant
- High Street business rates will be reviewed later this year
- Entrepreneurs’ Relief will be retained, but lifetime allowance will be reduced from £10m to £1m
- £5bn to be spent getting gigabit-capable broadband into rural areas
- VAT on digital publications, including newspapers, books and academic journals to be scrapped from December
Environment and energy
- The Government will increase taxes on pollution and from April 2022 the climate change levy on electricity will be frozen but increased on gas.
- Plastic packaging tax will come into force from April 2022
- Manufacturers and importers whose products have less than 30% recyclable material will be charged £200 per tonne
- Subsidies for fuel used in off-road vehicles – known as red diesel – will be scrapped “for most sectors” in two years’ time
- Red diesel subsidies will remain for farmers and rail operators
- £120m in emergency relief for communities affected by this winter’s flooding and £200m for flood resilience
- Total investment in flood defences to be doubled to £5.2bn over next five years
- At least £800m will be invested in carbon capture and storage.
- £640m “nature for climate fund” to protect natural habitats, including 30,000 hectares of new trees
Transport, infrastructure and housing
Mr Sunak pledged to “get Britain building” and spend more than £600bn over the next five years to revamp infrastructure. The Government’s National Infrastructure Strategy will set out the details later this Spring.
- There will be a new “economic campus” for the Government in the North and 22,000 civil servants will be moved out of central London.
- More than £600bn is set to be spent on roads, rail, broadband and housing by the middle of 2025
- There will be £27bn for motorways and other key roads, including a new tunnel for the A303 near Stonehenge
- £2.5bn will be made available to fix potholes and resurface roads over five years
- The Government will double the amount spent on flood defences between 2015 to 2021 to £5.2bn.
- Mr Sunak pledged £5bn to fund the Government’s plans to roll out next-generation broadband.
- £650m to tackle homelessness, which will provide an extra 6,000 places for rough sleepers
- Stamp duty surcharge for foreign buyers of UK properties to be levied at 2% from April 2021
- An additional £1bn will be provided to remove unsafe cladding for buildings above 18 metres in the wake of the Grenfell Tower disaster.
Alcohol, tobacco and fuel
- Fuel duty to be frozen for the 10th consecutive year
- Duties on spirits, beer, cider and wine to be frozen
- Tobacco taxes will continue to rise by 2% above the rate of retail price inflation
- This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars
- Business rate discounts for pubs to rise from £1,000 to £5,000 this year