Rishi Sunak will use a giveaway budget next week to pave the way for a post-lockdown boom.
Help for motorists, hospitality firms and the housing market is expected to be among a string of eye-catching policies.
The Chancellor is set to shelve plans for tax rises, including a threatened 5p increase in fuel duty that would have hit millions of drivers.
He is also poised to announce further VAT and business rate cuts for the hospitality and tourist industries, continue the stamp duty holiday and extend the jobs furlough scheme.
The Mail can reveal Treasury officials are examining even more dramatic plans for a major stimulus to the economy later this year.
This could include vouchers for high street shoppers and lower alcohol duty for restaurants and pubs battered by coronavirus restrictions until early summer.
The latter move would be coupled with higher levies on supermarket booze to help local traders. A return of last summer’s Eat Out to Help Out scheme is another possibility.
Officials are also said to be examining the case for long-term reform of the stamp duty system because of concerns that it distorts the housing market.
Rishi Sunak will use a giveaway budget next week to pave the way for a post-lockdown boom. Help for motorists, hospitality firms and the housing market is expected to be among a string of eye-catching policies
The Chancellor is set to shelve plans for tax rises, including a threatened 5p increase in fuel duty that would have hit millions of drivers (stock photo)
He is also poised to announce further VAT and business rate cuts for the hospitality and tourist industries, continue the stamp duty holiday and extend the jobs furlough scheme
Mr Sunak had hoped to use his budget to set out a path to restoring the battered public finances.
Record borrowing has seen the national debt top £2trillion for the first time. But the third coronavirus lockdown has forced him to shelve plans for immediate tax rises.
Instead he will set aside billions of pounds to support the economy through the remainder of the lockdown – and clear the way for an economic rally when curbs are eased in the spring and summer.
As Conservative MPs continued to press the Government for a quicker end to coronavirus restrictions:
- Gavin Williamson was preparing to announce that teachers will be given almost total control on GCSE and A-level grades;
- Ministers launched an advertising blitz encouraging Britons to still stay at home;
- It emerged that prisoners could jump the queue for vaccinations;
- A postcode lottery was blamed for healthy people in their twenties receiving jabs;
- The first one-shot vaccine was endorsed by US regulators;
- Almost half of those who had cancer symptoms in lockdown delayed seeking help;
- A government adviser said children should not hug grandparents ‘too much’ until the roll-out had been assessed;
- ‘Family vaccine passports’ could be used under an app developed by British Airways.
In one of the most important moves expected next week, a Cabinet source confirmed that existing support packages – including the VAT cut from 20 per cent to 5 per cent, as well as the business rates holiday – would be extended until the summer.
This will help hospitality and tourism businesses weather the storm until they can reopen. The £50billion furlough scheme will be extended until the end of June when the Government hopes to lift all restrictions.
Help for motorists, hospitality firms and the housing market is expected to be among a string of eye-catching policies
‘There is broad agreement that the support package has to go hand in hand with the roadmap,’ the source said.
Tory MP Giles Watling has urged ministers to act to prevent pubs and restaurants being undercut by ‘cheap supermarket booze’. Boris Johnson yesterday said Mr Sunak was ‘looking very closely’ at the idea, although the move will not be ready in time for the budget.
An influential think-tank is urging the Chancellor to go further by giving away £9billion in vouchers for shoppers to spend in nearby high streets.
The Resolution Foundation said a £100billion stimulus was needed to ‘increase the chances of a strong recovery from the pandemic-induced slump and to ensure the recovery reaches firms and families’.
The Treasury last night declined to comment on the contents of Wednesday’s budget. But Tory sources said the Chancellor was now expected to drop plans for an immediate 5p increase in fuel duty.
One source in the Treasury said the Chancellor had abandoned the planned rise partly because of concerns it could push people on to public transport when ministers are trying to limit passengers to slow the spread of Covid.
RAC fuel spokesman Simon Williams said last night: ‘Many drivers see their cars as a safe way to carry out essential journeys and have come to see having access to a vehicle as more important during the pandemic.
‘If the Chancellor were to raise fuel duty, he would also risk choking any economic recovery as it will lead to increased costs for consumers and businesses.’
Mr Sunak will issue a warning that soaring debt could put the UK at the mercy of interest rate rises in the long term. And he is expected to signal a rise in corporation tax from 19 per cent to at least 23 per cent before the next election.
Conservative MPs believe he will also suggest that the fuel duty freeze will end later this parliament.
Mr Sunak will issue a warning that soaring debt could put the UK at the mercy of interest rate rises in the long term. And he is expected to signal a rise in corporation tax from 19 per cent to at least 23 per cent before the next election
The Mail can reveal Treasury officials are examining even more dramatic plans for a major stimulus to the economy later this year. This could include vouchers for high street shoppers and lower alcohol duty for restaurants and pubs battered by coronavirus restrictions until early summer
Much of the budget is expected to focus on schemes to create jobs and help retrain those left out of work by the series of lockdowns.
Treasury officials fear unemployment will continue rising until the summer, despite the continuation of the furlough scheme.
One insider added: ‘At the moment, the debate is all about jabs, but by the summer it will be about jobs – we need to be ready for that.’
Mr Sunak is expected to unveil billions more in investment to help kickstart a recovery from the worst recession since the Second World War.
Treasury chief secretary Steve Barclay last night revealed that a £4billion ‘levelling-up’ fund for infrastructure projects will be extended to Scotland and Wales with an additional £800million in funds.
However, in a move that led to SNP accusations of a ‘naked power grab’, Mr Barclay confirmed that funding allocations will be controlled by central government.
Sir Keir Starmer indicated that Labour would oppose any rise in corporation tax. The Labour leader, who stood on a 2019 manifesto to raise corporation tax to 26 per cent, told MPs it was ‘not the time for tax rises for families and for businesses’.
Reprieve on Stamp Duty: ‘Holiday’ on house-buying tax to be extended till summer as Chancellor eyes reform
Rishi Sunak is poised to extend the stamp duty holiday until the end of June in next Wednesday’s Budget – and could reform the tax entirely.
The move would benefit an estimated 100,000 buyers whose deals are at risk of collapse due to Covid-related delays.
Property website Rightmove predicted that extending the stamp duty holiday beyond the current cut-off date of March 31 could also generate another 200,000 sales.
The Mail revealed last month that an extension was being considered by Mr Sunak due to disruption caused by coronavirus, with many would-be buyers facing long delays.
Rishi Sunak is poised to extend the stamp duty holiday until the end of June in next Wednesday’s Budget – and could reform the tax entirely (stock photo)
Treasury officials are now also examining the case for reforming the stamp duty system, amid concerns that it distorts the housing market.
5p fuel duty hike set to be stalled – but for how long?
Plans for a 5p increase in fuel duty are set to be shelved by Rishi Sunak, amid fears it could wreck the post-Covid recovery.
The Chancellor has warned Tory MPs privately that the rise would be needed to pay for a 12-month extension of the £20-a-week Universal Credit top-up.
But the prospect of an end to the decade-long freeze on fuel duty has sparked anger on the Tory benches that alarmed Boris Johnson.
In a letter to Mr Sunak this week, 26 Tory MPs said that a major rise in fuel duty would have a ‘detrimental impact on millions’.
The 50-strong Northern Research Group of Conservative MPs has also opposed the plan.
One northern Tory MP said: ‘In Red Wall seats in the North, fuel duty is toxic. It is not unusual for families in my constituency to spend £100 a week on fuel to get to work. Anything put on that directly hits household budgets and stifles growth.’
A senior Tory told the Mail that a compromise would see the 5p increase dropped in return for the rise in Universal Credit being limited to six months. The Treasury declined to comment last night on ‘speculation’.
But one source in the department said the Chancellor had abandoned an immediate rise because of concerns it could push people out of their cars and on to public transport, hitting efforts to control the spread of Covid.
Howard Cox, founder of the FairFuelUK campaign, welcomed the shelving of the rise, but warned that the Chancellor appeared determined to raid motorists in the longer term.
Mr Cox said: ‘If the rumours are to be believed, the Chancellor will dress up the decision behind Covid reasoning.’ He added: ‘It is just a temporary stay of fiscal execution.’
The Chancellor introduced a temporary cut in stamp duty last July, scrapping the tax for all sales under £500,000. The previous threshold was £125,000, or £300,000 for first-time buyers.
The changes saved those buying more expensive properties up to £15,000, while many were spared from paying the tax at all.
According to Halifax, house prices jumped by £57,000 across England and Wales in the second half of last year.
But with the country back in lockdown, the Chancellor is said to have decided now is not the right time to risk slamming the housing market into reverse.
Industry experts welcomed the prospect of an extension – but warned this would simply delay the ‘cliff edge’ moment unless wider reforms are introduced.
London estate agent Jeremy Leaf, former residential chairman of the Royal Institution of Chartered Surveyors, said: ‘There are still a lot of people out there who are really struggling to complete in time for the current deadline and this could really be helpful to them.
‘Some started their transactions many months ago – in July and August in some cases – and they are still trying to get it done.
‘Those are the people I feel sorry for and so I hope these reports are accurate for their sakes.’
Tom Bill of estate agents Knight Frank said an extension was ‘inherently fair’, but expressed fears the holiday could have negative effects if it lasts too long.
‘At the moment you have a system that has become overwhelmed because of the sheer volume of deals going through,’ he said.
‘Many buyers and sellers have had their completion dates put at risk by that through no fault of their own.
‘That being said, there comes a point where the stamp duty holiday can overstay its welcome and become harmful – if an ever-shifting tax cut starts to create speculation that leads to inaction – and so there does eventually need to be some kind of finality.’
He also warned a longer holiday could add to ‘downward pressure’ on prices expected this spring, as more families put their homes on the market after schools reopen.
The Treasury says 90 per cent of buyers pay no stamp duty at all under the current rules, with average savings at around £4,500. It declined to comment on speculation ahead of the Budget.
RUTH SUNDERLAND: Now let’s scrap this rotten tax for good
How fabulous it will be if the stamp duty holiday is extended in next week’s Budget – but how much better still if Rishi Sunak were to scrap this rotten tax for good.
The Chancellor would not only win homebuyers’ undying gratitude, but would be giving the economy a much-needed boost. Stamp duty clogs the housing market’s arteries and contributes to a host of other economic ills.
It has, with justification, been branded the worst tax in Britain. Abolition is long overdue.
The property market mercifully has held up well in the pandemic, but if and when stamp duty is reinstated, it will risk grinding that market to a juddering halt: the last thing the country needs as it emerges hesitantly from lockdown.
If Rishi Sunak were to do away with it altogether, it would bring benefits to the economy that would reverberate well beyond propping up house prices.
How fabulous it will be if the stamp duty holiday is extended in next week’s Budget – but how much better still if Rishi Sunak were to scrap this rotten tax for good. Pictured: Rishi Sunak holds the budget box in Downing Street in March 2020
Stamp duty is a terrible tax, philosophically and economically. One function of taxation is supposed to be rewarding socially desirable behaviour and punishing the reverse. Yet stamp duty flies in the face of this.
It is in fact a deeply cynical tax because it exploits people’s natural human desire for a secure home, and preys on the fact that property ownership is hard-wired into British culture.
It inflicts pain at all points on the property ladder. For first-time buyers, it is a huge imposition on top of a deposit. For those at the next stage, seeking a larger home to start a family, it is a formidable barrier. And it is a potent deterrent to ‘last-time buyers’: retired folk who would like to downsize.
A London School of Economics study found reluctance or inability to pay the levy left older people marooned and often lonely in unsuitable homes.
Stamp duty is a very old tax dating back as far as 1694, but for most of its long history, it has troubled relatively few Britons.
Stamp duty is a terrible tax, philosophically and economically. One function of taxation is supposed to be rewarding socially desirable behaviour and punishing the reverse. Yet stamp duty flies in the face of this (stock photo)
In the 1960s, for example, it was payable at a rate of 1 per cent on home purchases of more than £5,500 – but back then, the average price was significantly lower than that and hardly anyone had to pay.
Only recently has it become so onerous. Ironically, a lot of this has happened under Conservative administrations which ought to have known better.
The rot really set in with George Osborne, who in 2014 introduced a system of ratcheting rates, the highest of which is an eye-watering 12 per cent on the portion of a property price above £1.5million. That sounds a lot to pay for a house, but would drag in a fair few relatively ordinary homes in London and the South East.
Stamp duty is a prime example of the ‘Laffer effect’, where increases in rates do not necessarily result in bigger revenues. Before the pandemic, receipts from the duty actually fell, as people simply opted not to move.
For evidence, look no further than all the basement and loft conversions to be seen in middle-class enclaves: they are testament to the fact people would rather spend their money on home improvements than give it to the taxman.
The ill effects don’t stop at the housing market. Stamp duty has a chilling effect on mobility, geographic and social, because it makes it harder for people to move from regions where property prices are low to more prosperous places where home values are higher.
When the tax system imprisons people in this way, it is just wicked.Talented northerners should not be compelled to write an enormous cheque to HMRC to take a promotion down south. Getting rid of stamp duty should be part of levelling up.
Rishi Sunak may fret that getting rid of the tax would deprive the Exchequer of income at a time when cash is sorely needed.
Stamp duty has a chilling effect on mobility, geographic and social, because it makes it harder for people to move from regions where property prices are low to more prosperous places where home values are higher
Revenues from the levy on residential properties have been running at about £8.4billion a year prior to the pandemic measures. That would, on the face of it, leave a hole in the Chancellor’s pocket – but fortunately, there are offsetting factors.
Without stamp duty, many more homes would change hands, bringing a slew of spending and job creation which would generate tax receipts in abundance.
It may be there does need to be some form of taxation on residential property and whatever guise this takes, it is unlikely to be popular.
What is for certain, though, is stamp duty, which suppresses the housing market and curbs job mobility, is an appallingly poor way to go about it.
Home ownership is the cornerstone of the economy and of our society. Any tax that wantonly makes people’s aspirations harder to achieve is a bad one.
Rishi Sunak should show his credentials as a Conservative chancellor and a champion of home-owning democracy by getting rid of it once and for all.