Rishi Sunak has had quite a first year as Chancellor of the Exchequer, dropped into a crisis just as Winston Churchill was with Dunkirk just weeks after he had assumed the role of Prime Minister.
One year on the future remains uncertain. Let us hope this year’s budget survives contact with events for longer than last year’s budget, delivered into teeth of an unfolding storm.
One year on, 700,000 people have lost their jobs, GDP is down 10%, our national borrowing is higher than at any time outside a war situation. The OBR are reporting a more optimistic forecast, ultimately leaving the economy 3% smaller overall as a result of economic scarring from COVID. Bad but immeasurably better than it might have been.
Underlying debt will peak at 98.1% of GDP in year after next before falling from that peak. Sunak warns that it will be the work of many governments over many decades to pay back.
Austerity is dead, this is a budget for growth. Lots of it.
Whilst interest rates are affordable now, Sunak warns that Sovereign Bond yields can rise dramatically, and in a major warning for the future signals that any such rise will require a different solution to maintain future affordability. This may be a quote he refers back to in coming years.
The Big Announcement for an Investment Led Recovery
Super-Deduction for Business Investment. When companies invest over the next two years they will introduce a super-deduction for the expense at a spectacular 130% of the expenses against profit <<More to follow later>>
The expected tax grenades: not as explosive as feared:
- Personal tax thresholds frozen to 2026 (but no rise to Income Tax, NI or VAT)
- This includes IHT, pensions lifetime allowance – frozen but at least not slashed, CGT allowance but tax rises implicit by stealth
- In April 2023 Corporation tax will rise to 25%, however 70% of businesses with £50,00 profits or less will pay 20% tax with a taper up to the full rate of profits between £50,000 and £250,000
- Business loss carry back extended.
- No duty increases
The heavily trailed good news materialises. Many more generous than flagged:
- The SDLT (stamp duty) holiday will be extended, by three months, and then the nil rate band will drop to £250,00 till the end of September when normal rates return.
- 5% temporary VAT for hospitality extended to the 30th of September, and then 12.5% until April 2022
- Furlough will be extended till the end of September with tapered up contributions from employers for the last three months starting in July
- Fourth and fifth three monthly grants for the self-employed however there will be reduced support for those who don’t need it
- 600,000 newly self-employed people can claim the fourth and fifth income grant tranches
- Universal Credit: A six month extension of the £20-per-week COVID uplift
- Minimum wage raised to £8.91 from April
- Business restart grants: up to 6,000 restart grants for business per premises, up to £18,000
- A 95% Mortgage scheme for first time buyers from April ready for implementation by main banks, guaranteed by the Government
And what we were hoping for…….
Green, fast growing new business will be supported by the establishment of eight new Freeports with world leading tax breaks.
Recover loan scheme for all businesses that would have qualified for CBILS or BBLS of £25,000 to £10,000,000 with an 80% government guarantee for applications in 2021
Enterprise Management and R&D Incentives major consultation initiated, with pensions included as potential funders of start-ups and high growth businesses. It is not what the alternative investment sector was hoping for, expecting some immediate action to enhance the attractiveness of these investments.