3 March 2021
Introducing his second Budget, emphasising that he will still do “whatever it takes”, Chancellor Rishi Sunak said that his focus was on preventing the growth of unemployment as the country emerges from the latest lockdown.
While the undoubted success of the vaccination programme suggested that there would be a strong recovery, he warned that there would be dangers ahead if the Government failed to prepare for the need to eventually rebalance the books, given the unprecedented sums that it had spent in battling the effects of the pandemic.
Support will be extended well beyond the end of the roadmap out of lockdown, Mr Sunak said, before setting out a three-part plan:
First, support people and businesses
Once on the way to recovery, take time to fix public finances; and then
Begin building the future economy.
Support for businesses and people
An extra £1.65 billion will ensure that the Covid-19 vaccination roll-out in England continues to be a success, Mr Sunak said.
The furlough scheme will be extended to the end of September 2021. While there will be no change to the requirements for employees, firms will be asked to contribute 10% towards the hours their staff do not work in July, then 20% in August and September as reopening gains pace
. Further grants for the self-employed will be targeted at those most affected. Those suffering more than a 30% drop in profits will get the full grant, others will get a percentage. The newly self-employed were previously excluded but, if they have filed a tax return by 2 March 2021, they can now claim.
Extending support to the lowest paid, the extra £20 per week paid to Universal Credit claimants will continue for another six months. Furthermore, the National Living Wage (NLW) will rise to £8.91 from April. There will be a one-off payment of £500 to eligible Working Tax Credit claimants across the UK.
A new restart grant will be available in April to help the businesses re-opening first with grants of £6000. The later ones such as gyms, as they will face more problems, will get £18,000.
In addition, £700 million will be made available to help the creative sector to re-start.
While Bounce Back Loans are ending, a new Recovery Loan scheme will offer sums of between £25,000 and £10 million backed by an 80% Government guarantee.
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.
Rates, tax and mortgages
The 100% business rate holiday will continue through until June, with a two-third discount for rest of the year. The 5% reduced rate of VAT for hospitality, accommodation and attractions across the UK will be extended to the end of September and will only return to normal levels in stages, starting with 12.5% until 31 March 2022.
The Stamp Duty relief level of £500,000 will be extended to 30 June when the nil rate band will double until the end of September. A new Mortgage Guarantee scheme will provide help for those with just 5% deposits meaning 95% mortgages on offer from April.
The £65 billion being provided by this Budget puts the total Covid support package at over £400 billion. To sustain this defence of people and jobs, the Government has borrowed at a rate only previously seen during wartime.
While the time was not right for detailed rules and targets, the Chancellor emphasised that the State should not be borrowing to pay for everyday spending. It cannot let debt rise indefinitely, he went on, but it can use low interest rates to invest in capital projects.
Two new measures will, Mr Sunak said, “ask more from those who have most”:
Personal tax thresholds will be frozen after the next rise and maintained at that rate until 2026 as will the VAT threshold.
In 2023, the rate of Corporation Tax paid on profits will go up to 25% (still the lowest in the G7). Small businesses with profits below £50,000 will stay at the 19% rate and only 10% of firms will pay the full rate.
On the other hand, he offered businesses two new concessions.
With regard to the tax treatment of losses, they can now carry back up to £2 million for three years (worth up to £760,000 per company).
To unlock investment, he is introducing a “super deduction” for future investment which will enable firms to reduce their tax bill by 130% of the cost of their investment. This is worth around £25 billion to UK companies over the two-year period the scheme will be in full effect.
Planned increases in duty on spirits, wine, beer and fuel are all cancelled.
Training and recruitment
Two new training schemes will help small businesses to become more productive.
Help to Grow Management — offering world class management training with mentoring and with the Government covering 90% of the cost.
Help to Grow Digital — offering small firms free training and 50% discount on software.
Enrolment for both will be open in the near future.
Employers taking on new apprentices of any age will see the incentive payment double to £3000 and £7 million will be made available for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
The Home Office will be announcing ambitious visa reforms to allow the best talent in science, technology and innovation to come from around the world to work in the UK.
Going green and regional
The first UK Infrastructure Bank will be opened in Leeds with £12 billion provided by the Government and with a further £28 billion expected to be available from other investors. There will also be a new retail savings product — Green Bonds — which will encourage investment into projects dedicated to accelerating the UK’s push to become a net-zero economy.
Major Government departments including the Department for International Trade (DIT), Department for Business, Energy & Industrial Strategy (BEIS) and the Treasury are to establish a “campus” in Darlington.
A Levelling-up Fund will be launched inviting applications from local authorities across the country and there will be over £1 billion funding for a further 45 towns in England through the Towns Fund, supporting their long-term economic and social regeneration as well as their immediate recovery from the impacts of the pandemic.
Bids were invited by the Government last year for areas wishing to establish Freeports. These are planned to make it easier and cheaper to do business with cheaper customs and reduced regulation on building and investing.
The eight areas in England chosen to become Freeports are:
East Midlands airport
Felixstowe and Harwich
Liverpool city region
Comment — Paul Holcroft, Managing Director at Croner
As the governments of England, Scotland, Wales and Northern Ireland plan to relax lockdown restrictions, hopefully for the last time, it has remained clear that the ongoing impact of the pandemic on businesses is far from over.
To this end, eyes will have all turned to the Chancellor today to announce how he intends to support companies across the UK as we, hopefully, head back to normality.
A significant aspect of today’s Budget is the extension of the furlough scheme, something that has provided a lifeline to businesses across the country since it was originally put in place in March 2020. The news that it is going on until the end of September will undoubtedly be extremely welcome to many employers, especially those that are still not expecting to open until at least June, such as nightclubs.
If all goes to plan, this means that the furlough scheme will remain an option for employers for a few months after restrictions are expected to be lifted entirely on 21 June, which will hopefully help them to slowly bounce back from the major disruption they may have seen.
An interesting development is that, once again, employers will be asked to start contributing to the scheme from July, something that we previously saw introduced last year as the Government aimed to wind the scheme down before it was extended.
Whilst this may at first glance be concerning for employers, they should remember that, by July, the plan is for life to be, essentially, much more normal across all the devolved nations, with the UK Government likely anticipating that the need to use the scheme will be much diminished.
Crucially, businesses will be able to use flexible furlough for quite some time.
What we have yet to hear is whether the Government will start to clamp down on who can actually use the scheme as restrictions are relaxed, such as the requirement to have already been previously furloughed after a certain date that we saw last year.
The Budget also did not state any plans to resurrect the Job Retention Bonus, through which employers were to be provided financial incentives to keep staff on following the end of the scheme, something that was eventually cancelled when it was extended in October.