UK’s £2.8TRILLION debt mountain amid grim figures

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. 

The UK economy still will not have clawed back lost ground from coronavirus by 2026 with the government’s watchdog warning the debt mountain is set to hit £2.8trillion despite the prospect of swingeing tax rises.

The grim assessment from the OBR underlines Rishi Sunak’s view that it will take a ‘long time’ to recover from the crisis. 

The fast vaccine rollout means the picture has improved marginally – but GDP will not return to pre-pandemic levels until the middle of next year. 

And in five years’ time the economy will still be 3 per cent smaller than it would have been if the pandemic never happened.

Unemployment will still peak at 6.5 per cent, but that is down from the bloodcurdling 11.9 per cent predicted last July. 

In spite of a swathe of revenue-raising measures being brought in by the government, national debt is set to hit an eye-watering £2.747trillion in 2023-4, equivalent to a peak of 109.7 per cent of GDP. 

By 2026-7 the central forecast is that it will be over £2.8trillion and still bigger than the whole economy’s annual output. 

The Budget Red Book shows that while policy decisions mean the government spends an extra £58billion in 2021-22, by 2025-6 it is bringing in nearly £30billion a year 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, finally stopping debt rising.  

While upping the outlook for next year, the OBR also slashed its GDP forecast for every other year until 2025, including a cut for this year to 4 per cent from the 5.5 per cent growth previously pencilled in.

This follows the biggest plunge in the UK economy for more than 300 years in 2020, with GDP tumbling 10%.

The independent forecaster also laid bare the toll on the public finances from more than £400 billion of Covid-19 support to businesses and households.

It is predicting Government borrowing will soar to £355 billion in 2020/21 – lower than the £394 billion first forecast but still 17 per cent of national income and the highest level since the Second World War.

Borrowing will remain at eye-watering levels in 2021/22 at £234billion, up from the £164.2billion pencilled in before and 10.3 per cent of GDP, but will fall gradually to 2.8 per cent in 2025/25.

In a crucial Budget that will set the country’s course for years, Mr Sunak announced that income tax thresholds are being frozen until 2026 and corporation tax is being hiked from 2023 today as he revealed the government is spending an ‘unimaginable’ £407billion on the Covid response.

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.   

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. 

‘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.

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.   

In spite of a swathe of revenue-raising measures being brought in by the government, national debt is set hit an eye-watering £2.747trillion in 2023-4, equivalent to a peak of 109.7 per cent of GDP

Unveiling a swathe of tax hikes to come, with income tax thresholds to be frozen until 2026, the revenue-raising measures will take the burden to the highest level since the late 1960s

Unveiling a swathe of tax hikes to come, with income tax thresholds to be frozen until 2026, the revenue-raising measures will take the burden to the highest level since the late 1960s

Borrowing was at a peacetime record due to the coronavirus fallout, as the government scrambles to keep business afloat

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 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 the Chancellor's freeze to income tax rates would mean more than two million people being dragged into higher bands by 2026

The OBR said the Chancellor’s freeze to income tax rates would mean more than two million people being dragged into higher bands by 2026

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 - six months earlier than previously thought

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 – six months earlier than previously thought

Rishi Sunak posed with his Treasury team in Downing Street today - although they did not appear to be two metres apart

Rishi Sunak posed with his Treasury team in Downing Street today – although they did not appear to be two metres apart

The costs of the government's response to coronavirus have racked up dramatically since Rishi Sunak delivered his first Budget last March

The costs of the government’s response to coronavirus have racked up dramatically since Rishi Sunak delivered his first Budget last March

OBR says pension costs will fall due to Covid deaths  

Excess deaths as a result of coronavirus will reduce spending on the state pension and increase inheritance tax receipts, according to analysis of Budget data.

More than 144,000 deaths involving Covid-19 have occurred in the UK since the start of the pandemic, figures published by the UK’s statistics agencies show.

Most coronavirus deaths have been in people aged over 65, many of whom will have been receiving the state pension.

The Office for Budget Responsibility (OBR) estimated that will partly cause the Government’s pensioner spending to fall by £600million in 2020/21 and £900 million in 2021/22, relative to its March 2020 forecast.

While the fiscal watchdog said the ‘primary driver of lower spending is the weaker outlook for average earnings growth’, excess coronavirus deaths have also reduced the number of people receiving pensions relative to previous assumptions.

‘Indeed, with virus-related deaths rising sharply again in recent months, we have revised up the number of excess pensioner-age deaths in 2020-21 from 90,000 in our November forecast to around 100,000 in this one,’ the OBR said in its report alongside the Budget.

‘This revision may appear small given the severity of the current wave, but the lockdown brought in to control the coronavirus has also dramatically reduced the number of influenza deaths this winter relative to a normal year.

‘Our forecast now also assumes some excess deaths in 2021-22, drawing on academic modelling published alongside the Government’s road map.

‘Excess deaths lower pensioner spending by £0.6 billion in 2020-21 and by £0.9 billion in 2021-22 relative to our March 2020 forecast.’

On inheritance tax, the Treasury forecasts that receipts will increase from £5.1 billion in 2019/20 to £6 billion in 2021/22, before falling to £5.8 billion the following year.

While the rise is attributed to the freeze of inheritance tax thresholds until April 2026 and the growth in the value of estates, higher Covid-19 deaths will also contribute.

The OBR said it had ‘revised up our assumption for excess deaths this year and next relative to November’.

It said that ‘higher virus-related deaths in the current wave of the virus have outweighed the effect of lockdown reducing deaths from other causes, particularly from influenza and other respiratory diseases’.

However, the OBR said receipts have been ‘revised down substantially relative to our pre-pandemic forecast thanks to lower equity prices and lower house prices’.

‘The effect of these on growth in the value of estates more than offsets the small lift to receipts due to the increase in deaths this year,’ the watchdog said.

Excess deaths as a result of coronavirus will reduce spending on the state pension and increase inheritance tax receipts, according to analysis of Budget data.

More than 144,000 deaths involving Covid-19 have occurred in the UK since the start of the pandemic, figures published by the UK’s statistics agencies show.

Most coronavirus deaths have been in people aged over 65, many of whom will have been receiving the state pension.

The Office for Budget Responsibility (OBR) estimated that will partly cause the Government’s pensioner spending to fall by £600 million in 2020/21 and £900 million in 2021/22, relative to its March 2020 forecast.

While the fiscal watchdog said the ‘primary driver of lower spending is the weaker outlook for average earnings growth’, excess coronavirus deaths have also reduced the number of people receiving pensions relative to previous assumptions.

‘Indeed, with virus-related deaths rising sharply again in recent months, we have revised up the number of excess pensioner-age deaths in 2020-21 from 90,000 in our November forecast to around 100,000 in this one,’ the OBR said in its report alongside the Budget.

‘This revision may appear small given the severity of the current wave, but the lockdown brought in to control the coronavirus has also dramatically reduced the number of influenza deaths this winter relative to a normal year.

‘Our forecast now also assumes some excess deaths in 2021-22, drawing on academic modelling published alongside the Government’s road map.

‘Excess deaths lower pensioner spending by £0.6 billion in 2020-21 and by £0.9 billion in 2021-22 relative to our March 2020 forecast.’

On inheritance tax, the Treasury forecasts that receipts will increase from £5.1 billion in 2019/20 to £6 billion in 2021/22, before falling to £5.8 billion the following year.

While the rise is attributed to the freeze of inheritance tax thresholds until April 2026 and the growth in the value of estates, higher Covid-19 deaths will also contribute.

The OBR said it had ‘revised up our assumption for excess deaths this year and next relative to November’.

It said that ‘higher virus-related deaths in the current wave of the virus have outweighed the effect of lockdown reducing deaths from other causes, particularly from influenza and other respiratory diseases’.

However, the OBR said receipts have been ‘revised down substantially relative to our pre-pandemic forecast thanks to lower equity prices and lower house prices’.

‘The effect of these on growth in the value of estates more than offsets the small lift to receipts due to the increase in deaths this year,’ the watchdog said.

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 700,000 more people out of work due to the pandemic and the whole world will take a long time to recover.  

Mr Sunak stressed the Government will not raise the rates of income tax, national insurance, or VAT – which would have broken a manifesto pledge.

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. 

But he added: ‘Instead, our first step is to freeze personal tax thresholds.’

The Chancellor went on: ‘We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.

‘The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.’ 

Mr Sunak said the rate of corporation tax paid on company profits will increase to 25 per cent in 2023.

He told MPs: ‘Even after this change the UK will still have the lowest corporation tax rate in the G7 – lower than the United States, Canada, Italy, Japan, Germany and France.’

He added: ‘First, this new higher rate won’t take effect until April 2023, well after the point when the OBR expect the economy to have recovered. And even then, because corporation tax is only charged on profits, any struggling businesses will, by definition, be unaffected.

‘Second, I’m protecting small businesses with profits of £50,000 or less, by creating a small profits rate, maintained at the current rate of 19 per cent. This means around 70 per cent of companies – 1.4 million businesses – will be completely unaffected.’ 

Mr Sunak said 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.

He told MPs: ‘That means only 10 per cent of all companies will pay the full higher rate. So yes, it’s a tax rise on company profits, but only on the larger, most profitable companies – and only in two years’ time.’

Mr Sunak also said: ‘For the next two years, I’m also making the tax treatment of losses significantly more generous by allowing businesses to carry back losses for three years, providing a significant cash flow benefit.

‘This means companies can now claim additional tax refunds of up to £760,000. And because of the current 8 per cent bank surcharge, the implied overall tax rate for banks would be too high. So we will review the surcharge, to make sure the combined rate of tax on the UK banking sector doesn’t increase significantly from its current level – and to make sure this important industry remains internationally competitive.’

Mr Sunak said the OBR forecasts show the response to Covid-19 is ‘working’, adding: ‘The Office for Budget Responsibility is now forecasting, in their words ‘a swifter and more sustained recovery’ than they expected in November.

‘The OBR now expects the economy to return to its pre-Covid level by the middle of next year – six months earlier than they previously thought. That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher.’

He said the watchdog’s July 2020 forecast suggested unemployment could peak at 11.9 per cent, telling the Commons: ‘Today, because of our interventions, they forecast a much lower peak: 6.5 per cent.

The OBR said its central forecast for GDP taking into account inflation was largely unchanged since November

The OBR said its central forecast for GDP taking into account inflation was largely unchanged since November

The prospects for GDP in the coming months are marginally worse than in November, with the lockdown impact being offset by the fast vaccine rollout

The prospects for GDP in the coming months are marginally worse than in November, with the lockdown impact being offset by the fast vaccine rollout

The OBR documents lay bare the shape of the Budget, with huge expenditure meaning higher borrowing in the first years of the forecast and then taxes being raked in later

The OBR documents lay bare the shape of the Budget, with huge expenditure meaning higher borrowing in the first years of the forecast and then taxes being raked in later

Official numbers published last month showed state debt was above £2.1trillion in January

‘That means 1.8 million fewer people are expected to be out of work than previously thought. But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority.’

The OBR documents revealed that the UK tax burden is now expected to hit the highest level since Roy Jenkins was Chancellor in the late 1960s.

In its latest set of economic forecasts, watchdog said the tax burden will rise from 34 per cent to 35 per cent of GDP in 2025-26.

More than half of this rise is as a result of the increase in corporation tax to 25 per cent. 

Furlough has already cost £53billion and was due to close at the end of April, with warnings of a wave of layoffs as still-stricken businesses cut loose workers.

The extension today will take the scheme, which costs around £5billion a month, well beyond the official target for ending lockdown on June 21 – raising questions about whether ministers expect to lift all restrictions at that point.

Self-employed workers will also benefit from another round of support paying them 80 per cent of profits. 

In a surprise move, the scheme will be extended to cover 600,000 ‘excluded’ workers who did not qualify before because they did not begin trading until 2019. 

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 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 Labour leader goaded Ms Sunak after he presented his plan to restore the nation's finances, saying that it 'will look better on Instagram'

The Labour leader goaded Ms Sunak after he presented his plan to restore the nation’s finances, saying that it ‘will look better on Instagram’

The Office for National Statistics has said over the whole of 2020 the economy dived by 9.9 per cent - the worst annual performance since the Great Frost devastated Europe in 1709

The Office for National Statistics has said over the whole of 2020 the economy dived by 9.9 per cent – the worst annual performance since the Great Frost devastated Europe in 1709

Keir Starmer lays into social media-loving Chancellor Rishi Sunak over spending plan that ‘papers over the cracks’

Sir Keir Starmer accused Rishi Sunak of using today’s Budget to ‘paper over the cracks’ that have opened up in the UK economy during the Covid pandemic –  as he took aim at the Chancellor’s love of social media.

The Labour leader goaded Mr Sunak after he presented his plan to restore the nation’s finances, saying that it ‘will look better on Instagram’.

Mr Sunak has hit the headlines recently over the amount of effort – and taxpayers money –  he has put into building his personal brand online.

This included a six-minute video released this week showing his Budget preparations and analysing his first year as Chancellor.

Labour increasingly sees the ambitious occupant of No11 as their main threat as he is the favourite to replace Boris Johnson as prime minister, perhaps even before the next election.

Responding to the Budget, Sir Keir laid into Mr Sunak’s financial record, saying: ‘After 11 months in this job, it’s nice finally to be standing opposite the person actually making decisions in this Government.

‘The trouble is it’s those decisions that have left us with the mess we find today – the worst economic crisis of any major economy in the last 12 months, unemployment at 5 per cent and as the Chancellor said, forecast to rise to 6.5 per cent, with debt of over £2 trillion.

‘I’m sure this Budget will look better on Instagram, in fact this week’s PR video cost the taxpayer so much I was half expecting to see a lion in the OBR forecast for it, but even the Chancellor’s film crew will struggle to put a positive spin on this. 

Mr Sunak confirmed the furlough scheme will be extended until the end of September, and employees will continue to receive 80 of their salary for hours not worked.

He told MPs: ‘As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September.’

Mr Sunak 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. He noted for the fifth grant, people will continue to receive grants worth three months of average profits – with the system open for claims from late July.

And a business rates holiday for hard-hit sectors will continue beyond the current deadline at the end of this month.

Mr Sunak is also launching a £100million taskforce to tackle furlough fraud, estimated to have cost up to £5billion.

A government report uncovered by MailOnline this week revealed that the government was already losing up to £52billion a year to fraud – more than the defence budget – and the problem might have reached ‘epidemic’ levels during the pandemic.

The contactless payment limit will more than double to £100.

The changes will see the legal single contactless payment limit raised from £45 to £100.

The Government said the change has been made possible by the UK’s exit from the European Union, which means we are no longer bound by EU rules on the maximum limit for contactless payment, which is currently set at £45.

Mr Sunak said: ‘As we begin to open the UK economy and people return to the high street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth.’ 

Alongside the financial package the government’s OBR watchdog is providing a vital assessment of the economy’s prospects, with hopes that the swift vaccine rollout might have slashed the black hole that needs to be filled with tax rises and spending cuts below the eye-watering £40billion some experts feared. 

The respected IFS think-tank said there were nearly £60billion of ‘giveaways’ for the coming financial year, compared with nearly £30billion of tax rises by 2026.

Director Paul Johnson pointed out that this was in addition to future spending cuts that related to previous plans laid out in the Autumn Spending Review.

‘How realistic I wonder?’ he wrote. 

Mr Johnson tweeted that the rise in corporation tax was an ‘extraordinary reversal in policy’.

‘Don’t forget the cuts in headline rate came with cuts in allowances too. The new investment subsidy only due to last 2 years. In medium term this is a very big rise in corporation tax,’ he tweeted.

He added that the UK already raises ‘considerably more’ as a percentage of GDP from corporation tax than countries like France and Germany, which have higher headline rates.

A Tory civil war is already raging over the prospect of tax hikes, with senior figures such as Lord Hammond and Lord Hague saying action must be taken to balance the books but others warning it will strangle the recovery.

Mr Sunak addressed the Cabinet this morning on the contents of his Budget, before announcing the measures to MPs at 12.30pm. 

But he has came under fire from Speaker Lindsay Hoyle for pre-briefing and his slick PR drive, including ‘rushing off’ after the Commons statement to take a press conference in No10. 

In a tough message to Cabinet this morning, Mr Sunak said ‘we must be honest with ourselves and the country’. ‘We are borrowing on an extraordinary scale – equivalent only to wartime levels,’ he told ministers, adding that ‘as a Conservative Government, we know that we cannot ignore this problem and it wouldn’t be right or responsible to do so’. 

Mr Johnson echoed the Chancellor’s grim words on the need to balance the books at Cabinet this morning, saying the measures in the Budget were ‘only possible because of the prudence of the Conservative government over a long period of time’ which meant the country had ‘gone into the crisis with strong public finances.

The PM said the Budget plot a course to ‘make the most of our post-Brexit future and as a science superpower’.

Business leaders praise Sunak’s support package 

Business leaders praised the Chancellor for going ‘above and beyond’ to protect companies still suffering from the coronavirus crisis, although he was warned that thousands of smaller firms are on the brink of collapse.

Tony Danker, director general of the CBI, said the Budget had succeeded in protecting the economy and kickstarting a recovery, leaving open the question of competitiveness in the long term.

He said: ‘The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending.

‘Thousands of firms will be relieved to receive support to finish the job and get through the coming months. The Budget also has a clear eye to the future; to ensure finances are sustainable, while building confidence and investment in a lasting recovery.

‘But moving Corporation Tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.’

Jonathan Geldart, director general of the Institute of Directors, said the Budget delivered a solid platform for many businesses to relaunch as the economy reopens.

‘The extension to the furlough scheme will provide a vital cushion to support jobs as restrictions unwind and firms begin the costly process of rescaling.

‘Restart grants and ongoing business rates relief give a cashflow boost to many firms that will struggle to make full productive use of their properties as restrictions linger.

‘Widening income support for the self-employed is a step forward, but the Chancellor missed a trick by not providing grants for company directors who continue to be left out in the cold.’

Dr Adam Marshall, director general of the British Chambers of Commerce, said there was much to welcome, adding: ‘The Chancellor has listened and acted on our calls for immediate support to help struggling businesses reach the finish line of this gruelling marathon and to begin their recovery.

‘Extensions to furlough, business rates relief and VAT reductions give firms a fighting chance not only to restart, but also to rebuild.

‘This Budget provides reassurance to businesses, provided that they are able to restart and rebuild according to the Government’s road map.’

Business leaders generally praised the Chancellor for going ‘above and beyond’ to protect companies still suffering from the coronavirus crisis – although he was warned that thousands of smaller firms are on the brink of collapse.

Tony Danker, director general of the CBI, said the Budget had succeeded in protecting the economy and kickstarting a recovery, leaving open the question of competitiveness in the long term.

He said: ‘The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending.

‘Thousands of firms will be relieved to receive support to finish the job and get through the coming months. The Budget also has a clear eye to the future; to ensure finances are sustainable, while building confidence and investment in a lasting recovery.

‘But moving Corporation Tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.’

Jonathan Geldart, director general of the Institute of Directors, said the Budget delivered a solid platform for many businesses to relaunch as the economy reopens.

‘The extension to the furlough scheme will provide a vital cushion to support jobs as restrictions unwind and firms begin the costly process of rescaling.

‘Restart grants and ongoing business rates relief give a cashflow boost to many firms that will struggle to make full productive use of their properties as restrictions linger.

‘Widening income support for the self-employed is a step forward, but the Chancellor missed a trick by not providing grants for company directors who continue to be left out in the cold.’

Dr Adam Marshall, director general of the British Chambers of Commerce, said there was much to welcome, adding: ‘The Chancellor has listened and acted on our calls for immediate support to help struggling businesses reach the finish line of this gruelling marathon and to begin their recovery.

‘Extensions to furlough, business rates relief and VAT reductions give firms a fighting chance not only to restart, but also to rebuild.

‘This Budget provides reassurance to businesses, provided that they are able to restart and rebuild according to the Government’s road map.’

Federation of Small Businesses chairman Mike Cherry, said: ‘This Budget will help many small firms with their final push through to September, but there is little here to aid job creation or help people return to work.

‘Ensuring the newly self-employed can now access support marks a big step forward – we’re pleased our campaign has been heard – but directors, who appear to have been left out yet again, will be incredibly disappointed.

‘Thousands of small businesses are on the brink of collapse and thousands more are suffering from low confidence as cash reserves dwindle.’

Mr Sunak’s decision to push on until the end of September, three months after all restrictions are due to be lifted, will raise eyebrows. 

Rishi Sunak did the traditional Chancellor's pose outside 11 Downing Street today as he headed for the House of Commons

Rishi Sunak did the traditional Chancellor’s pose outside 11 Downing Street today as he headed for the House of Commons

The UK looks to have avoided a double-dip recession after growth stayed positive in the fourth quarter of last year

The UK looks to have avoided a double-dip recession after growth stayed positive in the fourth quarter of last year 

Mr Sunak briefed the Cabinet on the contents of the Budget this morning before heading to the Commons to announce the plans to MPs

Mr Sunak briefed the Cabinet on the contents of the Budget this morning before heading to the Commons to announce the plans to MPs

Speaker slams Sunak’s Budget PR drive 

Sir Lindsay Hoyle has slammed Rishi Sunak’s pre-Budget PR drive, telling the Chancellor that policies should be announced to MPs first because ‘tradition matters’.

Much of Mr Sunak’s eagerly-awaited fiscal statement has been pre-briefed by the Treasury to the press.

When Boris Johnson referred to the looming announcements at PMQs, Sir Lindsay wryly observed: ‘I think I already know most of it.’ 

In an interview earlier, the Commons Speaker, said ‘at one time the Budget was never revealed to the media’ ahead of time.

He said it is ‘important that people hear it on the floor of the House’ first and suggested that approach is something ‘we’ve got to get back to’.

Meanwhile, Sir Lindsay said he expected Mr Sunak to ‘sit through’ the entirety of post-Budget questions from MPs and that he must not ‘dash off’ in order to hold his pre-announced press conference at 5pm.

Treasury sources said the move was to avoid a ‘cut-off’ as some firms resume trading for the first time in more than a year.

‘They don’t want a cliff edge and we have listened,’ said a source. 

But the Treasury also acknowledged the extension would be a ‘cushion’ if reopening is delayed. 

The cost of the scheme is due to be curbed after the economy is reopened. 

Furloughed staff now get 80 per cent of pay from the state, up to £2,500 month, with employers paying only national insurance and pension contributions. 

From July firms will also have to pay 10 per cent of wages as the state share shrinks to 70 per cent – and in August the figures will change again, to 20 per cent and 60 per cent respectively.

Almost five million people were furloughed at the end of January – double the number in October, but well below the peak of almost nine million last May. 

Up to last week the scheme had cost £53.4billion. 

Business leaders have welcomed the new support. Kate Nicholls of UK Hospitality called it ‘a very positive move. 

And CBI chief economist Rain Newton-Smith said: ‘Extending the scheme will keep millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown.’

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said he was not expecting tax rises to come in this year.

He told BBC Radio 4’s Today: ‘The bigger picture is that we’ve had the most awful, very deep recession with a huge amount of Government support, so in some senses it hasn’t felt like that.

‘There are some suggestions and reports that the OBR’s (Office for Budget Responsibility) forecasts over the next few years are going to be rather more optimistic than they were back in November and if they are, if it looks like the economy has a good chance of bouncing back well, that will make some of his decisions a bit easier.

‘Because remember what the Chancellor is not really thinking about is ‘how can I pay back the debt that I’ve incurred over this couple of years?’.

‘It is much more, ‘if the deficit remains big in the coming years, what do I need to do to plug that hole?’. And if the economy is bouncing back then there is less of a hole to plug.

‘But there will still be something of a hole and that will mean, I expect, some tax rises, but not this year – in the next two or three years.’

Sir Robert Chote, former OBR chairman, warned against moving too ‘aggressively’.

‘Most economists would accept that if you have the size of the public debt jump up so you have a temporary increase in borrowing that increases your stock of debt, you don’t want to try to reverse that very quickly or very aggressively,’ he said.

‘One of the lessons obviously people have taken out of the experience after the financial crisis is that even if you do have a bigger structural budget deficit, even with that you don’t want to go at it too aggressively in case you weaken the recovery and make the situation worse.

‘But that is not to say that if there is a permanent increase in the structural budget deficit from the hit to the economy, and in addition you decide you want a larger state coming out of this, then the decisions on tax can’t be put off forever.’

He added that the country was in ‘a period of battlefield medicine for economic policy’ and that there needed to be an acceptance of a ‘broader brush approach’ than in less extreme circumstances.

Labour leader Sir Keir Starmer will respond to Mr Sunak’s Budget in the Commons today – and is facing infighting in his own party over its approach.

Sir Keir has been slammed by left-wingers after saying taxes should not rise quickly, while Labour bible the New Statesman has complained the party has ‘no idea what it wants’ under his leadership.   

Chancellor promises more than £400million in extra cash for struggling culture sector

Rishi Sunak today pledged £410million to the struggling culture and arts sectors in an attempt to help them get back on their feet after lockdown. 

The Chancellor has announced a £300million boost for the Government’s Culture Recovery Fund, taking total funding to £1.87billion.

Meanwhile, an extra £90million has been allocated to support the nation’s National Museums and other culture bodies to keep them afloat as coronavirus curbs are eased in the months ahead. 

Some £20million will be pumped into new culture projects in regional towns and cities as well. 

The Treasury said that the Culture Recovery Fund, currently worth £1.57billion, represented the largest ever one-off investment in UK culture.    

Museum and other cultural venues have been hammered during the coronavirus crisis. The British Museum in London is pictured in 2017

Museum and other cultural venues have been hammered during the coronavirus crisis. The British Museum in London is pictured in 2017

Mr Sunak said: ‘Throughout the crisis we have done everything we can to support our world-renowned arts and cultural industries, and it’s only right that we continue to build on our historic package of support for the sector.

‘This industry is a significant driver of economic activity, employing more than 700,000 people in jobs across the UK, and I am committed to ensuring the arts are equipped to captivate audiences in the months and years to come.’

The Culture Recovery Fund was launched in July last year and so far it has awarded more than £800million in grants to approximately 3,000 organisations. 

Cricket and other summer sports to benefit from £300million cash injection

A new £300million sports recovery package will help teams and venues transition from lockdown to welcoming back crowds in the summer, Rishi Sunak confirmed today.

Cricket, tennis and horse racing will all benefit from the cash as they plan for a return to something close to normal life. 

Boris Johnson has targeted June 21 as the date by which he wants all major coronavirus restrictions to be lifted.  

Mr Sunak said the money, a significant portion of which will go to English cricket, will help make the return of fans to stadiums a reality.  

‘As a huge cricket-fan I know there’s nothing that says summer more than watching your favourite team,’ he said. 

‘I can’t wait for sports grounds to be filled with fans with atmosphere again – this £300m cash boost will help make that a reality.’

The latest funding follows the example of the £300million Sport Winter Survival Package which was announced in November last year.  

The Government is hoping a £300million sports recovery package will help summer sports venues welcome back crowds later this year. Pictured is the behind-closed-doors third test between England and Pakistan at the Ageas Bowl, Southampton in August last year

The Government is hoping a £300million sports recovery package will help summer sports venues welcome back crowds later this year. Pictured is the behind-closed-doors third test between England and Pakistan at the Ageas Bowl, Southampton in August last year

Details on how the money will be distributed, how organisations can apply and when the cash could be handed out will be set out by ministers in the coming weeks. 

The England and Wales Cricket Board welcomed the extra money and said it would provide a ‘financial safety net’.  

‘Playing behind closed doors for all of last season has already had a severe financial impact on cricket, and that will continue this year until full crowds are able to return, while the recreational game has also suffered financially,’ a spokesman said. 

‘This support could be a lifeline for parts of the game, and we look forward to seeing the full details of how this funding will be distributed and how organisations can apply.’

New money to help community groups save struggling pubs and sports clubs

Community groups will be able to apply for up to £250,000 from the Government to help them save struggling pubs, Rishi Sunak announced today. 

The Chancellor has set aside a pot of cash worth £150million which will be available to people who want to keep community assets up and running. 

The Community Ownership Fund will also be able to be used to help save sports clubs, theatres and music venues which are in danger of closing. 

The fund, which will open in the summer, will see people bid for up to £250,000 of matched-funding to help them buy local assets to run as community-owned businesses.   

Community groups will be able to bid for up to £250,000 to help them secure the future of a local pub or sports venue

Community groups will be able to bid for up to £250,000 to help them secure the future of a local pub or sports venue 

Meanwhile, in exceptional circumstances people may be able to secure up to £1million in matched-funding to establish a community-owned sports club or sports ground.    

Mr Sunak said: ‘Pubs and sports clubs are the heart and soul of our local towns and villages – they’re the glue that keeps us together.

‘This fund will help to ensure vital local institutions aren’t lost to those who treasure them most.’ 

Government to introduce mortgage guarantee for first-time buyers to help them get on the housing ladder  

A mortgage guarantee scheme aimed at helping aspiring homeowners with small deposits onto the property ladder has been unveiled by the Chancellor. 

Rishi Sunak wants to incentivise lenders to provide mortgages to first-time buyers, and current homeowners, with just five per cent deposits to buy properties worth up to £600,000. 

The Government will offer lenders the guarantee they require to provide mortgages covering the remaining 95 per cent. 

The Treasury said low-deposit mortgages have ‘virtually disappeared’ because of the economic impacts of the coronavirus pandemic.

Boris Johnson has said the scheme will help ‘generation rent’ become ‘generation buy’.  

Ministers are introducing a mortgage guarantee scheme to help first-time buyers secure 95 per cent mortgages from lenders

Ministers are introducing a mortgage guarantee scheme to help first-time buyers secure 95 per cent mortgages from lenders 

The scheme, which will be subject to the usual affordability checks, will be available to lenders from April.

It is based on the Help to Buy mortgage guarantee scheme introduced in 2013 by David Cameron and George Osborne, that ran until June 2017.

Aiming to reinvigorate the market following the 2008 financial crisis, that scheme – distinct from the Help to Buy equity loan scheme – was said to have helped more than 100,000 households buy a home across the UK.

But there were also concerns that it artificially inflated prices and housebuilders’ profits. 

Hardest hit pubs, restaurants and shops to benefit from £5billion Covid grant scheme

Pubs, restaurants and shops hit hardest by the coronavirus pandemic will be boosted by a £5billion grant scheme to help them reopen as the national lockdown is eased, Rishi Sunak confirmed today. 

The ‘restart grants’ will be worth up to £6,000 per premises and will be designed to help non-essential retailers reopen and trade safely. 

Hospitality, hotels, gyms, as well as personal care and leisure firms, will be eligible for up to £18,000 per premises as they are due to open later under the plans for easing lockdown.

The Treasury estimates 230,000 firms will be eligible for the higher band, which will be awarded based on their rateable value, and 450,000 shops will also be able to apply. 

'Restart grants' worth up to £6,000 per premises will be available to shops and will be designed to help non-essential retailers reopen and trade safely. Oxford Street is pictured in January

‘Restart grants’ worth up to £6,000 per premises will be available to shops and will be designed to help non-essential retailers reopen and trade safely. Oxford Street is pictured in January 

The £5billion for restart grants is targeted at England, but the devolved nations in Scotland, Wales and Northern Ireland will receive an extra £794 million in funding through the Barnett formula.

Local authorities will be tasked with distributing the grants and will receive the funding in April.

The UKHospitality trade body welcomed the plan, saying many firms are ‘struggling to see how they could survive through’ Boris Johnson’s road map for reopening, with laws on social distancing set to continue until at least June 21 – the earliest date when nightclubs will be considered for reopening.

Vaccine rollout to receive £1.65billion boost to ensure every adult gets jab by end of July

Chancellor Rishi Sunak has pledged an additional £1.65billion to the UK’s vaccination drive to ensure the Government hits its target of a jab for every adult by the end of July.  

The success of the vaccination programme is viewed as one of the main keys to whether the Government will be able to stick to the PM’s reopening dates contained in his roadmap.

Ministers are aiming to have given a first dose of the vaccine to all of the top nine priority groups by the middle of April. 

They are then targeting a date of July 31 to have completed the rollout of first doses to all UK adults.  

Mr Sunak is also diverting £22million to fund a ‘world first’ trial to test if different vaccines can be used together and to see if a third dose is effective. 

Speaking ahead of the Budget, Mr Sunak had said it is ‘essential we maintain this momentum’ on the vaccination drive. 

‘Protecting ourselves against the virus means we will be able to lift restrictions, reopen our economy and focus our attention on creating jobs and stimulating growth,’ he added.

He will also give £33 million to improve the ability to respond to new variants and improve vaccine testing, including £5 million to create a ‘library’ of Covid-19 jabs. 

The Government is aiming to have offered a first dose of coronavirus vaccine to every UK adult by the end of July. Pictured is a vaccination centre located in Salisbury Cathedral, Salisbury, Wiltshire

The Government is aiming to have offered a first dose of coronavirus vaccine to every UK adult by the end of July. Pictured is a vaccination centre located in Salisbury Cathedral, Salisbury, Wiltshire

Rishi Sunak announces new route to UK for high-skilled foreign workers

The UK’s immigration system will be changed in an attempt to make it easier to attract the ‘brightest global talent’. 

Rishi Sunak has announced the creation of a new route for high-skilled workers to come to Britain. 

The Chancellor has also promised to streamline the sponsorship process for firms in order to cut red tape and reduce the paperwork burden on businesses. 

Mr Sunak is hoping the reforms will help to boost the number of researchers, engineers and scientists who come to work in the UK. 

The changes will include a new ‘elite’ points-based route that will help start-ups and fast-growing firms like fintech companies recruit the talent they need to innovate and grow. 

The Treasury said that under the new route ‘highly skilled migrants with a job offer from a recognised high-growth firm will qualify for a visa without the need for sponsorship or third-party endorsement’.

Mr Sunak said: ‘We’ve taken back control of our borders and are backing business with a skills-led approach to migration that works for the whole of the UK.

‘These reforms will ensure we maintain our global status as world-leader in science and innovation – welcoming those with unique expertise.’  

UK to become first sovereign issuer of green savings bond 

The UK is going to launch the world’s first sovereign green savings bond for retail investors, Rishi Sunak confirmed today.  

Ministers hope the move will enable savers to help drive the country’s shift to net zero by 2050. 

The green savings bond will be offered through NS&I, the Treasury-backed savings organisation which offers Premium Bonds and other savings products.

Mr Sunak said: ‘The UK is a global leader on tackling climate change, with a clear target to reach net zero by 2050 and a Ten Point Plan to create green jobs as we transition to a greener future.

‘In a world first, we’re launching a new green savings bond which will give people across the UK the opportunity to contribute to the collective effort to tackle climate change.’

The money raised through the sale of the bonds will be earmarked for renewable energy projects and clean transportation initiatives.