Furlough, Universal Credit and mortgages: The key announcements from Rishi Sunak’s 2021 Budget
Rishi Sunak has been accused of “naked pork barrel politics” after billions of pounds of Budget handouts appeared to favour Tory-held constituencies.
At a Downing Street press conference this evening, the chancellor was asked why 40 of 45 places receiving £1bn of “towns fund” grants are represented by his own party’s MPs. The borough of Richmondshire – which falls within his North Yorkshire seat – has also been given higher priority for a new £4.8bn “levelling up fund” than struggling Barnsley.
Mr Sunak was asked to reassure the public that he was using “fair criteria” to assess eligibility.
The chancellor announced earlier the extension of both VAT cuts for the hospitality and tourism industries, as well as prolonging the end of the stamp duty holiday, in the so-called “fiscal firepower” Budget.
He told MPs, despite the fact 700,000 people have lost their jobs since March 2020 and the economy has shrunk by 10 per cent, the UK’s GDP is set to return to its pre-Covid peak in mid-2022, according to the OBR.
Mr Sunak also revealed that the headline rate of corporation tax will rise from 19 per cent to 25 per cent from 2023, effectively reversing the policy of his predecessor George Osborne – though it still leaves Britain with the lowest rate of such a tax in the G7, below countries like US, Germany, and Canada.
Good morning and welcome to The Independent’s coverage of today’s Budget.
Tom Batchelor3 March 2021 08:16
Rishi Sunak pours billions more into Covid support
Some of the main elements of the chancellor’s statement to the Commons this afternoon were trailed last night, including extension to the furlough and changes to mortgage deposits.
As our political editor writes, Rishi Sunak will say he is ready to do “whatever it takes” to help businesses and people through this “moment of crisis”, promising to use “the full measure of our fiscal firepower” through tax and spending decisions in the Budget to protect jobs and livelihoods.
But the chancellor left no doubt that tax rises are also on the way to rebalance the UK’s public finances, which have plunged more than £2 trillion into the red after he pumped £280bn of borrowed cash into schemes like furlough, business rates relief, support grants and VAT breaks – and much of this spending is expected to be extended in Wednesday’s Budget.
Tom Batchelor3 March 2021 08:19
‘Tax rises, but not this year’ – IFS’ Paul Johnson
Paul Johnson, director of the Institute for Fiscal Studies (IFS), said he was not expecting Rishi Sunak to announce tax rises in the Budget. He told BBC Radio 4’s Today programme: “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.”
Tom Batchelor3 March 2021 08:29
Sunak’s furlough scheme ‘relatively generous’
Commenting on the furlough scheme, the IFS’s Paul Johnson said Rishi Sunak was offering badly affected businesses a “grace” period to help them get up and running once coronavirus restrictions are fully lifted in the summer.
Calling the extension “relatively generous”, Mr Johnson noted that the scheme does “reduce its generosity”, with employers having to contribute to salaries of staff unable to work from July.
“I think the thinking behind that is that there will be some businesses that are still struggling with demand, struggling to get back on their feet so giving them two or three months of grace will help to ensure that jobs are maintained,” he told the Today programme.
“Remember the Chancellor tried to do this last summer – he was intending to phase out furlough over the summer and early autumn and of course that couldn’t happen because of the return of the virus.
“The key thing now is that this really does end in September because we really do move back to normal.”
Tom Batchelor3 March 2021 08:38
The chancellor is ‘out on a limb’ on tax policy, says Labour
The shadow chief secretary to the Treasury has said “building up confidence” in the economy should be prioritised over tax rises.
Labour’s Bridget Phillipson told Sky News: “We don’t think that now is the right time for tax rises, the economy is in such a fragile position that hitting people in their pockets when we need to be building up confidence in our economy is absolutely essential.
“The chancellor is out on a limb on this, mainstream opinion is very clear that securing the recovery must be an absolute priority of the government.
“That should mean we don’t see tax rises immediately but action to protect family finance.”
Tom Batchelor3 March 2021 08:44
‘Cliff edge’ when furlough is fully turned off, warns Resolution Foundation
More policies need to “step in” to stop levels of unemployment rising after the furlough scheme ends, an economic think tank has said.
Resolution Foundation’s chief executive Torsten Bell told Times Radio: “The big picture is when it comes to unemployment the more difficult part of this crisis is ahead of us rather than behind us.
“So it is true as the furlough scheme is phased out, however that phasing out is done, whether that’s via employment contributions rising or just via the scheme being brought to an end, some of those jobs won’t be there for people to go back to.
“That should be a big feature of the discussions about the Budget today because the furlough scheme can’t stay forever but other policies do need to step in to make sure we see the smallest rise in unemployment as possible.”
Mr Bell added: “There is always going to be a cliff edge when the scheme is fully turned off but I think it’s right that he [chancellor] has taken a slower approach.”
Tom Batchelor3 March 2021 08:52
‘No case’ for clawing back pandemic debt quickly – OBR’s Chote
Sir Robert Chote, former chairman of the Office for Budget Responsibility (OBR), said there was “no robust case” for looking to claw back the UK’s pandemic debt quickly.
Sir Robert, who stood down in 2020 after 10 years in post, told BBC Radio 4’s Today: “The argument that we have borrowed an enormous amount of money – and goodness we have over the last year to 18 months – and that all has to be paid back very quickly, there is no robust case for making that argument.
“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.
“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.
Tom Batchelor3 March 2021 09:01
Rishi Sunak’s freeports ‘no magic bullet’
The new wave of freeports at the heart of Rishi Sunak’s Budget are unlikely to offer a “magic bullet” for boosting the UK’s economy, as their main impact will be to relocate activity and jobs rather than creating them, a report has warned. The main beneficiaries from the initiative will be the businesses and super-rich individuals who take advantage of the tax breaks they offer, while the public will bear the cost of the infrastructure required to make them function, said the report by thinktank UK in a Changing Europe.
And it was “simply untrue” to claim that they will transform the UK’s prosperity rather than give a boost to areas where they are located to the cost of other parts of the country without them.
Tom Batchelor3 March 2021 09:13
Vince Cable: My advice to Rishi Sunak ahead of the Budget
While the recovery is uncertain and interest rates low, it would be foolish to rush the process of deficit reduction, writes Vince Cable.
The chancellor says he wants to “level with the British people”. In words, maybe. But in deeds, not just yet.
Instead, he will try to ensure that there is post-Covid economic recovery by continuing to “do what it takes” to support loss-making businesses and jobs, and to stimulate consumer demand through the remaining months of an unwinding lockdown.
Tom Batchelor3 March 2021 09:25
Wednesday’s Budget timings
At 12pm, Boris Johnson will hold the regular Prime Minister’s Questions.
This will be followed immediately afterwards at 12.30pm by the chancellor delivering the Budget in the Commons.
Then at 3pm, the Office for Budget Responsibility will hold a press conference, setting out the main judgments and conclusions in their Economic and Fiscal Outlook report.
Two hours later, at 5pm, Rishi Sunak will give a post-Budget press conference.
Tom Batchelor3 March 2021 09:37
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