It’s been hard to miss Rishi Sunak and his red briefcase this past week. The budget sets out some of the Conservative’s economic thinking for the next year, but it can be hard to see beyond the headlines to what has actually been announced, and what it will even mean. Thankfully, our contributing editor Victor has written up ten key takeaways to help us all understand some key policy priorities aimed at ‘Building Back Better’.
1. The Furlough Scheme will be extended to September.
This will provide much needed support for businesses and workers, as around 80% of wages for staff temporarily laid off continue to be paid by the government (with some contributions from employers). However, they would undoubtedly have benefited from the announcement being made at an earlier date to provide more peace of mind for people who are still relying on this money to make ends meet.
2. Hospitality will benefit from the lower 5% Value Added Tax (VAT) rate until September.
As we all know too well, the hospitality industry has been one of the hardest hit by this crisis. By lowering the VAT rate - normally charged at 20% on items like food or non-alcoholic drinks sold in restaurants or cafes - businesses will be able to keep more of the money they make on their sales. This move was well received by UKHospitality, the industry body.
3. Alcohol duty will be frozen.
A duty is the name for yet another type of tax, which is normally collected on goods and services. There is a specific one for alcohol which is applied alongside the VAT rate of 20%. This is great news for pubs and breweries across the UK, although the sector has already called out for long-term business rate reform.
4. Corporation Tax (CT) will rise to 25% by 2023 for firms with profits of over £250,000.
Corporation Tax is a tax taken from the profits of businesses. After being lowered to 19% by George Osbourne, the Chancellor when David Cameron was Prime Minister, it is now being increased again. However, this change won’t come in until 2023, and under current plans it will only affect businesses making more than £50,000 (excluding around 70% of companies), with a ‘tapered’ rate meaning that only businesses making over £250,000 will pay the full rate.
The Chancellor has chosen to delay this hike to avoid stepping on the green shoots of economic recovery and allow businesses to keep investing their profits into the economy, whilst asking them to eventually pay more to help reduce the UK’s debt burden. He’s been greatly helped by Joe Biden’s commitment to raise CT to 28%, which means the UK could remain an attractive destination for investment.
5. A super deduction of 130% for capital allowances.
This means that whatever a firm spends on equipment and infrastructure, 130% of that figure will be taken off their tax bill. Critics hold that while this may help short-term economic recovery, it will not increase investment over the long-term.
6. The business rate holiday will continue until June.
Business rates are a tax charged on most non-domestic properties, like shops and pubs. Because so many places have been forced to stay closed under lockdown rules, this measure was introduced to reduce the tax burden on inactive businesses.
7. Stamp duty, a tax paid when purchasing a property, will continue to be suspended until July.
This is a bonus for those looking to get on the property ladder, but as our recent piece on the housing market makes clear, the UK is also in desperate need of a policy to boost the supply of homes.
8. Eight new freeports.
Although Rishi Sunak has become known for the huge government spending during the pandemic, he is also a strong supporter of free trade and private sector investment. As our article on the policy explains, freeports are a key part of his vision for post-Brexit Britain.
Places like Liverpool, the East Midlands, the Humber, and Teesside have all had their plans approved and each site could benefit from a strong regime of financial incentives.
9. A New UK Infrastructure Bank will have £12bn to invest in capital projects.
The Bank will fund construction projects, like new energy infrastructure, that fit in with the government’s net-zero carbon by 2050 target. However, the capitalisation falls short of the £20bn advised by the National Infrastructure Commission.
10. A new Treasury campus in Darlington.
Last but not least, something completely different. 750 Civil Servants will be moved to Teesside in North-East England. This is a pretty clear attempt to demonstrate this government’s ‘One Nation’ credentials by using the resources of central government to ‘level up’ overlooked areas and move money out of London. It remains to be seen whether anything more substantial will follow in its wake.