Former Labour leader Jeremy Corbyn today accused Rishi Sunak of stealing the economic policies of his hard-Left Shadow Chancellor John McDonnell for a radical Budget that will set Britain’s course for years.
Mr Corbyn told the Commons many of the Chancellor’s announcements, including furlough, the Green Industrial Revolution and the relocation of civil servants to the North, were policy proposals in Labour’s 2019 manifesto.
The Independent MP, whose five-year leadership of the Labour Party was mired in controversy, said Mr McDonnell had ‘sent substantial papers to the Treasury’ proposing a furlough scheme last year.
He added that the Government’s plan to increase corporation tax from 19 per cent to 25 per cent by 2023 is only marginally less than his own proposal of 26 per cent.
Mr Sunak today unveiled a swathe of tax hikes to come over the next five years – with income tax thresholds to be frozen until 2026 – as he tries to claw back the colossal £407billion spent during the pandemic.
Former Labour leader Jeremy Corbyn today accused Chancellor Rishi Sunak of stealing the economic policies of his hard-Left Shadow Chancellor John McDonnell
In his Budget Rishi Sunak hailed the impact of the vaccine rollout saying the government’s watchdog now expects the economy to get back to its pre-pandemic level by mid-2022
In spite of a swathe of revenue-raising measures being brought in by the government, national debt is set hit £2.747trillion in 2023-4, equivalent to a peak of 109.7 per cent of GDP
Borrowing was at a peacetime record due to the coronavirus fallout, as the government scrambles to keep business afloat
The OBR said that the tax burden is set to be at the highest level since the 1960s as Mr Sunak tries to heal the finances
The OBR said its central forecast for GDP taking into account inflation was largely unchanged since November
Budget 2021 at a glance
Here are the main points of Rishi Sunak’s Budget today:
- Office for Budget Responsibility (OBR) predicts economy will return to pre-Covid levels by the middle of 2022, six months earlier than previously though.
- OBR forecast 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 up to 2025
- Unemployment now expected to peak at 6.5 per cent, down from 11.9 per cent expected in July 2020 forecast, meaning 1.8million fewer people out of work.
- Furlough scheme extended to the end of September under current 80 per cent of salary rate.
- Employers asked to pay 10 per cent in July, then 20 per cent in August and September.
- Support for self-employed also goes on until September.
- £20 Universal Credit uplift remains in place for another six months.
- Apprentice grants for employers doubled to £3,000.
- £5billion fund for Restart Grants for businesses. Retailers will get up to £6,000 per site from April. Hospitality and leisure open later and will be able to claim up to £18,000.
- New recovery loan scheme for businesses of £25,000 to £10million, 80 per cent guaranteed by the Government.
- Business rate holiday in place until June and discounted for the remaining nine months of 2021-22 financial year.
- 5 per cent VAT rate for hospitality extended to September, then at 12.5 per cent until April 2022 before returning to 20 per cent regular rate.
- Stamp Duty holiday extended until June for homes worth up to £500,000, then phased back in.
- Mortgage guarantee scheme for those with 5% deposit to boost home sales.
- UK’s total public spending bill estimated at £407billion.
- The UK has borrowed £355billion – 17 per cent of GDP – the highest since the Second World War.
- No income tax, VAT or national insurance rises.
- Tax free income threshold will rise to £12,570 next year and then frozen until 2026.
- Higher rate threshold rises to £50,270 next year and then frozen until 2026.
- Corporation Tax increased to 25 per cent in 2023.
- Small Profit Rate of 19 per cent set up for small businesses.
- Inheritance tax thresholds, pensions lifetime allowance, and annual exempt amount in capital gains tax maintained at current levels until April 2026.
- Alcohol duty frozen.
- Fuel duty frozen.
Downing Street effectively set UK plc on a war footing last year as panic over the spread of coronavirus infected the country, furloughing millions of workers and injecting cash into the locked-down economy.
The Government’s moves have been criticised by a small chorus of anti-lockdown Tory MPs on the backbench, who have nervously eyed up the enormous sums of money which have been borrowed during the pandemic.
In a statement to the Commons today, Mr Corbyn said: ‘The Chancellor talks about extending the furlough scheme and protecting people on those wages.
‘I point out to him that the scheme includes no floor and that 80 per cent of minimum wage is a lot less than the money people need to live on.
It was my right hon. Friend the Member for Hayes and Harlington [Mr McDonnell] who proposed a year ago that we should have a furlough scheme. He sent substantial papers to the Treasury in order to bring that about.
‘Sadly, I do not believe that the Chancellor read all of them.’
He went on: ‘On public sector pay, many are going to be hit by the pay freeze and by a stealth income tax rise through the freezing of the tax allowance.
‘I remind the Chancellor that a previous Government – a Labour Government in the 1970s – came a cropper on that one when the Rooker-Wise amendment was passed to prevent the Chancellor from freezing the tax-free allowance.’
The former Labour leader added: ‘The Chancellor had obviously read quite a lot of the proposals made by my right hon. Friend the Member for Hayes and Harlington before the last election, in which he pointed out that he wanted to move jobs to the north and ensure that the increase in public spending that we were proposing would help people across the north.
‘The Chancellor made a big deal of about 750 jobs going to Darlington. Sadly, all that is cancelled out by the huge number of job losses in transport authorities across the north of England, particularly in Greater Manchester and Merseyside City Region.
‘That is because the Government have not provided them with the funding package to support transport systems that they have in London and other places.
‘This degree of unfairness between the north and the south will continue, and the degree of unfairness between the richest and poorest in our society will increase under this Budget.
‘Towards the end of his speech, the Chancellor managed to provide a great deal of greenwash for his proposals.
‘Of course, we all support a green industrial revolution. It was central to Labour’s manifesto at the last election, but where is the commitment to net zero emissions by 2030? Where is the commitment on protection of biodiversity to protect us all for the future? This Budget is such a lost opportunity.
‘At the end of it, our society will be more divided than it is at the present time, there will be greater stress and uncertainty in so many people’s lives because of this Budget. We can, should and must do much better than this.’
In a crucial Budget that will set the country’s course for years, the Chancellor said he knew the revenue-raising measures – which will take the burden to the highest since the 1960s – would be ‘unpopular’.
As well as allowing income tax thresholds to be eroded by inflation from April 2022, inheritance tax, VAT registration thresholds, pensions relief and the capital gains allowance are all being put on hold.
By 2026 a million more workers will be in the higher rate of tax, and 1.3million more will be paying the basic rate who are currently outside of the system.
But Mr Sunak insisted the alternative of ‘doing nothing’ was not right, pointing out the bulk of the measures will not be implemented until the recovery is well established.
Mr Corbyn told the Commons that many of Mr Sunak’s announcements, including furlough, the Green Industrial Revolution and the relocation of civil servants to the North of England, were policy proposals in Labour’s 2019 manifesto
He added that the Government’s plan to increase corporation tax from 19 per cent to 25 per cent by 2023 is only marginally less than his own proposal of 26 per cent
Fears of fresh lockdown as furlough is extended
Rishi Sunak today sparked fears of a future return to lockdown after he extended the furlough scheme to the end of September and announced grants for the self-employed will also continue.
The Chancellor used the Budget to confirm that furloughed workers will continue to receive 80 per cent of their wages for the next seven months.
However, businesses will be asked to contribute more to the scheme, starting with a 10 per cent contribution from July and a 20 per cent contribution from August.
Meanwhile, the Treasury will run two further rounds of its grants for the self-employed scheme, with the fourth round covering February to April and a fifth and final round covering from May onwards.
The fourth grant will provide three months of support at 80 per cent of average trading profits while the fifth grant will be more targeted, with the worst affected still getting 80 per cent while others will get 30 per cent.
Mr Sunak has opted to extend the handouts long beyond Boris Johnson’s target date for a return to something close to normal life in England of June 21.
The moves will therefore inevitably prompt concerns that the PM’s coronavirus roadmap for reopening could be delayed or that there could be another national shutdown in the future.
Defending his proposals this evening at a Downing Street press conference, Mr Sunak said the UK could not ‘ignore’ its growing mountain of debt as he said: ‘I know the British people don’t like tax rises, nor do I.
‘But I also know they dislike dishonesty even more, that is why I have been honest with you about the problem we have and our plan to fix it.’
At the press conference tonight, Mr Sunak was confronted with a chart showing that the Office for Budget Responsibility (OBR) expects the tax burden to be the highest since the 1960s as a proportion of GDP.
‘I guess what your chart doesn’t show is that all the other chancellors, if any of them have had pandemics to deal with,’ he replied.
‘We haven’t had a pandemic like this in over 100 years, so I think remember that’s why we’re having this conversation, that’s the problem that we’re grappling with.’
And in a sign that the Chancellor may not be finished with tax rises, he refused to be drawn on whether there could be a hike in capital gains tax in the future.
Mr Sunak had earlier hailed the impact of the vaccine rollout saying the government’s watchdog now expects the economy to get back to its pre-pandemic level by mid-2022 – six months earlier than previously thought.
Growth this year will be a bumper 4 per cent after the fast vaccine rollout, and unemployment should now peak at 6.5 per cent instead of 11.9 per cent. That means 1.8million fewer people will lose their jobs, according to Mr Sunak.
However, the economy will still be 3 per cent smaller than it should have been in five years’ time, with Mr Sunak pointing to a looming bill for taxpayers.
‘When the next crisis comes we need to be able to act again,’ he insisted in his hour-long speech, saying a one percentage point increase in interest rates on the UK’s £2.1trillion debt mountain would cost the UK £25billion.
In a barrage of big spending commitments worth a total of £65billion, Mr Sunak said he is extending the furlough scheme for an extra five months, as well as keeping self-employed and business bailouts.
The £20-a-week boost to Universal Credit will stay for another six months, alongside VAT and business rates breaks for hospitality, leisure and tourism.
There were efforts to get people shopping, including raising the contactless payment limit from £45 to £100, as well as freezing alcohol duties and dropping the idea of raising fuel duty.
But Mr Sunak warned that the largesse – on top of the £280billion already shelled out by the Treasury – must come to an end. Including the spend announced at the Budget last year it will total £407billion by the end of next year.
The costs of the government’s response to coronavirus have racked up dramatically since Rishi Sunak delivered his first Budget last March
Government borrowing is expected to be more than £355billion this financial year and is expected to stay high for years to come
Corporation tax will be increased from 19 per cent to 25 per cent in 2023, although there will be breaks for smaller businesses – potentially bringing in £20billion a year. The basic and higher income tax rates will be frozen from next year, dragging thousands more people into higher rates.
The Budget Red Book shows that while the Budget decisions mean the government spends an extra £58billion in 2021-22, by 2025-6 it is bringing in nearly £30billion more than previously expected – with Treasury officials claiming that ‘goes a long way’ towards balancing the books.
The OBR estimates that by the end of its forecast period the government’s deficit will be almost eradicated, at £900million. But national debt will hit an eye-watering £2.747trillion in 2023-4, equivalent to 109.7 per cent of GDP.
Mr Sunak set out a three-part plan for the recovery and repairing the devastated public finances – as well as turning the UK into a ‘science superpower’.
One major measure to fuel growth is a tax ‘super-deduction’ for companies that invest in the UK – meaning that they will be able to claim relief of 130 per cent of the value of their investment.
The scale of the tax break is so significant that the Red Book shows it is expected to cost nearly £13billion in reduced revenue.
The stamp duty cut has been kept on until the end of June, and eight new ‘freeports’ will also be created across England to step up economic growth.
Mr Sunak vowed to keep using the state’s full ‘fiscal firepower’ to protect jobs and livelihoods. ‘I said I would do whatever it takes. I have done and I will do so,’ he said.
‘We will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Once we are on the way to recovery we will need to begin fixing the public finances.’
Mr Sunak said there were already 700,00 more people out of work due to the pandemic and the whole world will take a long time to recover.