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.
Rishi Sunak announced that income tax thresholds are being frozen until 2026 and corporation tax is being hiked from 2023 today as he revealed the the government is spending an ‘unimaginable’ £407billion on the Covid response.
In a crucial Budget that will set the country’s course for years, the Chancellor said he knew the revenue-raising measures would be ‘unpopular’.
But he insisted the alternative of ‘doing nothing’ was not right, pointing out increases will not be implemented until the recovery is well established.
Mr 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.
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, he warned that the economy will still be 3 per cent smaller than it should have been, pointing to a looming bill for taxpayers.
‘When the next crisis comes we need to be able to act again,’ he insisted, saying a one percentage point increase in interest costs on the UK’s £2.1trillion debt mountain would cost the UK £25billion in servicing costs.
In a barrage of big spending commitments, Mr Sunak said he is extending the £53billion 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.
He 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.
And eight new ‘freeports’ will 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.
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 did the traditional Chancellor’s pose outside 11 Downing Street today as he headed for the House of Commons
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
Official numbers published last month showed state debt was above £2.1trillion in January
Government borrowing could be close to £400billion this financial year and is expected to stay high for years to come
What Rishi Sunak is dishing out in Budget
- The £53billion furlough job protection scheme extended from its current end point on April 30 to the end of September
- Corporation tax up from 19 per cent to 20, with a ‘pathway’ to raising it to 23 per cent. There may be an exemption for entrepreneurs
- Hospitality and tourism firms will benefit from an extension of the VAT cut – probably until the end of the summer
- Business rates holiday for the hardest hit sectors will continue beyond the current deadline at the end of this month
- No increase in the rate of income tax however thresholds are set to be frozen for three years, dragging 1.6million into higher rates
- Fuel duty is set to be frozen after Boris Johnson vetoed plans for an immediate 5p hike
- The stamp duty holiday – a tax break on purchases of homes worth less than £500,000 – set to be extended until the end of June
- An extra £410million for theatres and other arts venues. Cricket to benefit from £300million for sports
- Community groups to receive £150million to support local pubs and sports clubs
- A new £520million scheme to help small businesses grow and give them access to advice from the country’s top business schools
- New £100million taskforce to tackle furlough fraud, which is estimated at up to £5billion
Rishi 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.’
Furlough 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 Chancellor is also expected to extend the £20-a-month top-up to Universal Credit for another six months.
The current VAT cut for hospitality and tourism firms will also be extended, probably until the end of the summer.
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.
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.
The respected IFS think-tank said this morning that there should not be any tax rises this year, while former OBR chief Robert Chote said the UK was in a ‘period of battlefield medicine for the economy’ and the deficit should not be tackled ‘too aggressively’.
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 come 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’.
The Queen last night spoke with Mr Sunak by phone instead of the traditional audience on the eve of the Budget.
The Treasury shared a photograph of the chancellor during the call.
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.
Chief whip Mark Spencer was physically in Downing Street for the pre-Budget Cabinet meeting this morning
The furlough scheme that has cost Britain £53billion will be extended to the end of September as Rishi Sunak vows to do ‘whatever it takes’ to help the economy recover. Pictured, the Chancellor calls the Queen last night ahead of the Budget
The Queen last night spoke with Mr Sunak by phone instead of the traditional audience on the eve of the Budget. The Treasury shared a photograph of the chancellor during the call
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 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
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
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
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
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
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
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
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.