The Budget
Briefing Paper March 2021
Introduction
Chancellor of the Exchequer Rishi Sunak announced his second budget on March 3, and it is profoundly impacted by events surrounding the Coronavirus pandemic. The UK economy is looking to open up once again following an extremely tough year, but there may still be a long road to economic recovery and economic fairness in our society.
The largest disappointment for the NPC and our members is the exclusion of funding for the NHS and care. We keep hearing promises of a plan, but nothing transpires. Both the NHS and care have been chronically underfunded for decades and yet staff in these services have been at the forefront of COVID, many losing their lives. The NHS white paper on reform will not give the public a better service, only more privatisation through the back door.
Key Points
Furlough and Covid support
· Furlough extended to September 30 at up to 80% of wages or £2,500 a month. Firms must pay 10% of wages from July and 20% from August 1.
· Fourth self-employed grant paid next month, at up to £7,500 or 80% of historic average profits over three months. Eligibility extended to people who became self-employed in 2019/20.
· Fifth self-employed grant will be paid in July but be less generous. It will still be worth 80% of average profits, but only for those whose turnover has fallen by 30% or more. Those whose turnover fell by less will only receive a 30% grant.
· Covid spending to hit £352bn over two years - or £407bn once other fiscal support is included.
· £1.6bn for the vaccination programme, including £22m for a trial to test if different vaccines can be used together, or if a third dose is effective. £5m to create a “library” of Covid-19 jabs.
· £100m for a 'Taxpayer Protection Taskforce' staffed by 1,250 people to hunt Covid fraudsters, including furlough fraud.
· Furlough for pub workers and others will be extended to September 30
Tax
· Income Tax personal allowance frozen at £12,570 until 2025/26 in a stealth tax raid.
· Income Tax 40p threshold frozen at £50,270 until 2025/26 in a similar stealth tax raid.
· Corporation Tax to rise from 19% to 25% in April 2023 for firms with profits over £250k. Taper for firms with smaller profits, down to the 19% rate for 1.4million businesses with profits under £50k.
· Inheritance tax threshold frozen at £1m for married couples until March 2026 after years of breaks under the Tories.
· VAT registration threshold of £85,000 frozen for 2 years from April 2022.
· Annual exempt amount in Capital Gains Tax frozen until April 2026.
Wages
· Minimum wage to rise by 19p an hour to £8.91 for over-23s from April. It will hit £8.36 for those aged 21-22; £6.56 for those aged 18-20; £4.62 for 16 and 17-year-olds and £4.30 for apprentices.
· 23 and 24-year-olds included in highest minimum wage rate for the first time.
Benefits
· Universal Credit extended at current rate until September, delaying £20-a-week cut until then.
· But no uplift to legacy benefits for the disabled beyond 35p-a-week rise on April 12.
· Thalidomide Health Grant for 400 people to be extended for life, with £39m down payment to cover next four years.
Pensions
· Pensions lifetime allowance to be frozen at just over £1m until April 2026 in big cut to wealthier pensioners, worth £300m a year by 2025/26.
Cigarettes and alcohol
· No rise to tobacco duty today because the most recent was only in November - but long-term plans say it will rise by RPI inflation plus 2%, so cigarette prices could rise in future.
· Beer duty frozen as it has been since 2013.
· All other alcohol duties frozen as well for the second year in a row.
· Fuel duty frozen for the 10th Budget in a row - saving drivers but depriving the state of billions over years.
NHS and social care
· No plan for social care announced in the Budget - a long, long delayed plan is due later this year.
· No big announcement on NHS cash, which has got a long-term plan, other than Covid support above.
· No pay rise for NHS workers – however government announced a 1% increase the day after the Budget – still subject to pay review.
Housing
· Stamp Duty cut extended to June 30, saving first-time buyers up to £10k and landlords or those moving up the ladder up on purchases up to £500,000.
· Stamp Duty threshold will be £250k - double the usual rate - between July 1 and September 30 to 'smooth transition'
· 95% mortgages to return through a guarantee scheme that bails out banks but not buyers if things go wrong. Buyers can buy with a 5% deposit again as soon as April. Anyone can use scheme, not just first-time buyers.
Culture and sport
· £150m community ownership fund will match local fundraising up to £250,000 to help residents buy out stricken pubs - as well as sports clubs, theatres, music venues and post office buildings.
· £408m to help museums, theatres and galleries in England reopen - including £300m for a grants fund that venues can apply to. That also includes £90m for national bodies, and other major venues, galleries and theatres around the country.
· £300m summer sports recovery package (on top of £300m in winter), with "significant chunk" going to cricket.
Businesses and spending
· New 'super deduction' gives firms £25bn tax cut - 'biggest in modern history'. When firms invest they can reduce their taxable income by 130% of the cost of the investment. A construction firm buying £10m of new equipment could cut taxable income by £13m, rather than £2.6m under current system. It will last the next two years.
· 5% reduced VAT rate for pubs, restaurants and other industries extended by six months to September 30. From then until April 2022 there will be a 12.5% interim rate before returning to 20%. Move costs £5bn.
· 100% business rates holiday continues to the end of June, then discounted by two-thirds for firms forced to shut until March 2022. There will be a lower cap for those able to stay open. Move costs £6bn.
· Eight freeports in East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. Controversial policy will give tax breaks, cheaper customs and simpler planning to firms.
· Contactless card payment limit to rise from £45 to £100 later this year. People can still make 5 transactions in a row but only up to £300 total.
· Firms can carry back losses of up to £2m for three years to cut their tax bill - with up to £760,000 of tax refunds.
· £126m for apprenticeships to fund 40,000 traineeships in England - and raise cash incentive for employers to £3,000. Previously firms could claim £2,000 for each apprentice aged 16 to 24, or £1,500 for those over 25.
· £520m Help to Grow fund to support small businesses in the UK with training and software.
Education
· No big announcement for schools in today's Budget speech.
· Schools have been crying out for support
Military, police and justice
· £19m on top of existing £125m for domestic violence programmes - and to pilot a network of respite rooms to provide support for vulnerable homeless women.
· £10m to support veterans with mental health needs.
Regions and infrastructure
· £12bn of capital for the UK Infrastructure Bank launching in Spring, along with £10bn of government guarantees.
· New Treasury campus in Darlington.
· City and Growth Deal packages for Ayrshire, Argyll and Bute, Falkirk, North Wales, Mid Wales and Swansea Bay.
Environment
· UK will launch a sovereign green savings bond for everyday investors to buy through NS&I, to spend on renewable energy and clean transport, later in 2021.
Conclusion
As expected, Chancellor Rishi Sunak’s 2021 Budget largely focused on shoring up the country and the economy as we navigate towards what we hope is the end of the pandemic.
He gave away billions, taking government borrowing for 2021/22 to £355bn, the highest figure outside wartime - but in the view of the NPC it was a weak Budget with precious little comfort for older people and those in need, or indeed for health and care workers who have suffered most during this devastating past year.
One of the biggest omissions from the Budget speech was any reference to badly needed investment in our struggling NHS and care services.
In his response to the Chancellor’s speech, Labour leader Keir Starmer demanded to know why there was no plan for social care or NHS pay rise in the Budget? A very good question that has been repeated by many organisations and groups around the country.
The calculated announcement a day after the Budget speech, that the government is only considering a paltry 1% pay rise for nurses is nothing short of an insult.
The suspension on evictions has now been extended until 31 May 2021, but there will be many older people among those who could face eviction from their homes in just a couple of months.
In shoring up business, the Chancellor missed a huge opportunity to invest in public services beyond the current fight against Covid-19, and to show respect for and to value front-line workers, and plan for the future.
While the NPC is pleased the Chancellor gave some help to those working-age people who desperately need it because of the impact of the pandemic, the extension of furlough and retention of the £20 uplift for those on Universal Credit - many of whom are approaching retirement - until only September is a huge concern. It begs the question, ‘what happens to people who are just getting by when these measures suddenly end?’
Somehow, it feels like the Chancellor is giving with one hand and taking away with the other. He may be attempting to shore up the economy, but he is also storing up many more social and economic problems that the country will have to face in the very near future.
Further Information