Billions more promised in UK Budget
Michael Pinson, News Editor
3 Mar 2021, 1:59 p.m.
Chancellor Rishi Sunak has pledged billions more in support for businesses and individuals in another pandemic-focused UK Budget.
As is common in recent years, many of the measures were announced prior to the official statement, and confirm that financial support will continue for several months as the UK, hopefully, eases restrictions after a year of the Covid-19 pandemic.
Having already spent £280 billion in response to the pandemic and the economic damage of lockdown restrictions, the Chancellor is facing calls to rein in spending by some, but many economists have warned against removing support prematurely.
One of the key policies confirmed is that the Job Retention Scheme – furlough – is to be extended until September, but with increasing onus on the business to pay towards it. The government will continue to pay up to 80% of an employee’s salary until June. In July the employer will then be expected to pay 10% of this, with the government paying 70%. August and September will then reduce this further to a 60 – 20 split.
The winding down of the furlough scheme should coincide with the government’s current roadmap for the easing of restrictions, and should help mitigate a wave of unemployment. With social distancing in place however, and consumer confidence not expected to return immediately some business may still see reduced trade for the remainder of the year, and without furlough will inevitably let staff go.
Other measures of note saw the stamp duty holiday extended, and a push for government-backed mortgages with a 5% deposit, both designed to encourage house buying and selling, from current and new homeowners alike. Reduced business rates and the VAT cut for the hospitality industry have both also been extended, providing further support for the severely affected leisure industry.
Future tax rises were announced, as a starting effort to rebalance public spending, with corporation tax to rise to 25% in 2023. This rise will affect the largest companies only, but is a big rise from current rates of 19%, though it will bring the UK more in line with the rates charged in other countries. For individuals however, income tax, capital gains tax and inheritance tax rates have been fixed to 2026.
The lack of personal tax rises will be welcome for many, and serves as a reminder of the balancing act the Chancellor faces between reducing public debt and stifling economic recovery. Chancellor Sunak made it clear that it will take “many governments over many decades” to reduce public debt, signalling no intention for now for the Conservatives to return to austerity.
The measures in today’s Budget amount to £65 billion additional spending, taking the total government spending in response to the pandemic up to £407 billion. With government spending to continue in the billions, inflation will remain one of the key drivers for the gold price in the months ahead.