Chancellor of the Exchequer Rishi Sunak got to his feet in the House of Commons shortly after 12.30pm to deliver the crucial speech on his plans for taxation and spending as Britain recovers from the coronavirus pandemic.
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Chancellor Rishi Sunak outside number 11 Downing Street ahead of the Budget
- Sunak said Covid-19 has ‘fundamentally altered’ our way of life. He said: ‘Much has changed, but one thing has stayed the same: I said I would do whatever it takes – I have done and I will do.’
- He told MPs that the damage the coronavirus has done to the UK economy has been ‘acute’ as he began his statement.
- Sunak added it will take the UK and the whole world ‘a long time to recover from this extraordinary economic situation, but we will recover.’
- The Chancellor said more than 700,000 people have lost their jobs since March 2020 and the economy has shrunk by 10 per cent, the largest fall in more than 300 years.
- The Office for Budget Responsibility is now forecasting, in their words ‘a swifter and more sustained recovery’ than expected in November.
- The OBR forecasts that the economy will grow this year by 4 per cent, by 7.3 per cent in 2022, then 1.7 per cent, 1.6 per cent and 1.7 per cent in the last three years of the forecast.
- Sunak said a July 2020 forecast suggested unemployment could peak at 11.9 per cent but a much lower peak of 6.5 per cent is now expected.
- He said the measures taken to support the economy amounted to £65billion over this year and next, taking total Government support to £407billion.
- The Bank of England will keep its 2 per cent inflation target but now its remit will also reflect the importance of environmental sustainability and the transition to net zero.
- Sunak confirmed the Treasury would establish a new economic campus in Darlington, and said there would be more than £1billion for 45 ‘new town’ investment deals.
- Freeports – ‘special economic zones with different rules to make it easier and cheaper to do business’ – will be located at East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.
- The new UK Infrastructure Bank will be located in Leeds and invest across the UK in public and private projects to finance the ‘green industrial revolution’
- Sunak said the Government is funding new port infrastructure to build the next generation of offshore wind projects in Teesside and Humberside.
The Teesside Wind Farm near the mouth of the River Tees off the North Yorkshire coast
- Sunak confirmed the furlough scheme will be extended until the end of September, and employees will continue to receive 80 per cent of their salary for hours not worked.
- He said the support for self-employed workers will also continue until September, with the fourth grant providing three months of support at 80 per cent of average trading profits.
Sunak delivers his Budget statement to the House of Commons
Benefits and social policies
- The Chancellor announced an extra £19million for domestic violence programmes.
- He said the £20 weekly increase for Universal Credit will continue for a further six months.
- Sunak said funding to support survivors of the Thalidomide scandal will be guaranteed forever, starting with £40million of new money.
- The national minimum wage will be increased to £8.91 per hour from April.
- Sunak said the Government will not raise the rates of income tax, national insurance, or VAT but will freeze personal tax thresholds at the current level this year.
- The basic allowance will increase again next year to £12,570 and be held there until April 2026.
- The higher rate threshold will be increased next year to £50,270, and then also remain at that level until 2026.
- Sunak said the inheritance tax threshold, the pensions lifetime allowance and the annual exempt amount in capital gains tax will be held at current levels until April 2026.
- The OBR revealed the Chancellor’s move to freeze the income tax personal allowance and higher rate threshold for four years will bring 1.3 million more people into the tax system and create one million higher rate taxpayers by 2025-26.
Business taxation and support
- Sunak said a new ‘restart grant’ will be provided in April to help businesses as they reopen.
- He told MPs non-essential retail businesses will receive grants of up to £6,000 per premises.
- Hospitality and leisure businesses, including personal care and gyms which open later or be more impacted by restrictions when they do, will get grants of up to £18,000. That totals £5billion of new grants, on top of the £20billion already provided.
- When the ‘Bounce Back Loan’ and CBIL schemes come to an end a new recovery loan scheme starts with loans from £25,000 to £10million available through to the end of this year.
- Sunak said the 100 per cent business rates holiday in England will continue from April until June.
- The 5 per cent reduced rate of VAT will be extended for six months to September 30, and then an interim rate of 12.5 per cent for another six months.
- Corporation tax paid on company profits will increase to 25 per cent in 2023.
- Small businesses with profits of £50,000 or less will be kept on the current rate of 19 per cent. This accounts for around 70 per cent of companies – 1.4 million businesses.
- A taper above £50,000 will also be introduced to ensure only businesses with profits of £250,000 or greater will be taxed at the full 25 per cent rate.
- The OBR said the corporation tax rise will raise 3.2 per cent of GDP in revenue by 2025-26 – its highest level since 1989-90.
- A £150million ‘Community Ownership Fund’ will provide grants of up to £250,000 to help rescue pubs and other businesses that are at threat of closing permanently due to the lockdowns.
- Sunak told MPs the £500,000 nil rate stamp duty band will not end on 31 March and scheduled, it will run to 30 June.
- To ‘smooth the transition back to normal’, the nil rate band will be £250,000 until the end of September and then the usual level of £125,000 from 1 October.
- Sunak announced a ‘mortgage guarantee,’ with homebuyers who can only afford a 5 per cent deposit benefiting from a Government guarantee on their mortgages.
- Lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95 per cent mortgages from next month.
The £500,000 nil rate stamp duty band will continue to run until 30 June
Alcohol and fuel duties
- The planned increases in duties for spirits, wine, cider and beer will all be cancelled, Sunak said.
- Similarly, the scheduled increase in fuel duty is cancelled.
Cheers! A rise in taxation on booze has been cancelled by the Chancellor