By HAL WILLIAMS
THE BRITISH chancellor Rishi Sunak has announced the 2021 Budget, with pledges to help recovery from the Covid pandemic.
The support package for 2021/22 is £352bn, and the budget deficit will be £355bn this year, or 17 percent of GDP. The national debt will rise from 88.8 percent of GDP this year to 93.8 percent in 2022, to peak at 97.1 percent in 2023-24, Sunak estimates.
Sunak, starting off by stating the obvious, said the pandemic had caused “acute damage”: more than 700,000 jobs lost, a 10 percent shrinkage of the economy – the largest fall in 300 years – and borrowing at its highest level since World War II.
“It’s going to take this country, and the whole world, a long time to recover from this extraordinary situation.” Corrective action was needed to control borrowing, Sunak said.
The chancellor says the economy could recover more quickly than expected, predicting four percent growth this year and more than seven percent in 2022.
Here are some of the main points, with comments sent to BV from industry experts and business leaders.
The scheme will be extended until the end of September, as previously announced late on Tuesday. Unemployment is expected to peak at 6.5 percent, down from a forecasted peak of 11.9 percent. The self-employment income support scheme has also been extended to cover February to April, worth 80 percent of average trading profits up to £7,500. The £20-a-week uplift in universal credit is extended for six months.
Musab Hemsi, partner at HR and employment lawyers LexLeyton said: “This package had to transform a blurry picture of the public finances into a clear, sensible and practical outlook for financial support as the recovery from Covid-19 begins in earnest.
“While the Chancellor may not have provided complete clarity for the next year, business leaders will welcome the package announced today. It goes some way to shed light on the outlook for businesses that are sustainable in the long run.”
The £5bn restart grant for businesses aims to help companies restart. The bounce-back CIBLS scheme has ended, with a replacement plan for loans between £25,000 and £100,000 to run until the end of the year.
Mark Heppell, Partner at JMW Solicitors, says: “The freeze on Capital Gains Tax (CGT), and no mention of business disposal relief (Entrepreneurs’ Relief), is good news and business owners will breathe a sigh of relief (for now).
“The speculation surrounding CGT reforms was quite heavy leading up to the budget, and given the reviews that have been carried out in the last year, I would not be surprised to see changes in the near future so the message to business owners planning their exit will still be to bring forward their plans as it does feel like the days are numbered for the current regime.”
Hospitality and leisure businesses are to pay no business rates for three months, and rates will be discounted for the rest of the year in a £6bn tax cut.
The government will not raise national insurance, income tax or VAT, but will freeze personal tax thresholds. The inheritance tax threshold, pensions lifetime allowance, annual exempt allowance from capital gains tax and VAT exemption threshold are also frozen.
Corporation tax will increase to 25 percent, the lowest rate in the G7. Luke Hamm, CEO of GovGrant, said: “The increase in Corporate Tax rate was obvious and understandable, but it is fantastic to hear a focus on investment lead recovery. The super deduction of 130 percent makes sense in terms of tangible assets, but will it do enough in terms of ongoing investment in R&D? It tends to be operational expense, so that remains to be seen.”
“I’m also not surprised by the increase in Corporation Tax (from 2023),” added Mark Heppell, “and it makes sense to me that the most profitable businesses will be called upon to contribute in a greater proportion. Hopefully the freezing of the rate below £50k profit and tapering to £250k profit will give some comfort to SMEs, but it will mean that, for most, there is more to pay.”
Marc von Grundherr, director of lettings at estate agent Benham and Reeves, said: “While Help to Buy in its various forms has helped homebuyers to an extent, it’s also done a good job of pushing house prices higher and homeownership even further out of reach for many.”
Alcohol and fuel duties will be frozen for the second year. Stamp duty will be lifted on properties up to £500,000 until the end of June, due to return to usual levels from October.
A guarantee will help first-time buyers access 95 percent mortgages. CEO of Enness Global Mortgages, Islay Robinson, said 95 percent mortgage products in any form take the market into “overheated, dangerous territory”.
CEO of Keller Williams UK, Ben Taylor, commented the extension of stamp duty relief “will be very warmly welcomed by homebuyers waiting to complete and currently stuck in the transaction pipeline due to market delays.”
Matthew Cooper, founder and managing director of Yes Homebuyers, commented: “Ironic, perhaps, that a delayed Budget should deliver a delayed stamp duty holiday deadline, which does little more than delaying the inevitable reality that awaits the market when the reprieve does finally end.”
The new national infrastructure bank will open in Leeds with £12bn government capitalisation, and green projects will be supported through a recovery bond.
Freeports – special economic zones with different rules – will be launched. They will include infrastructure planning, customs and favourable duties and taxes.
Eight areas selected were East Midlands airport, Felixstowe and Harwich, Humber, Liverpool city region, Plymouth, Solent, Thames and Teesside.
Thames Estuary Envoy, Kate Willard, said: “We believe that the Thames Estuary is the right place to have freeport status, and are so pleased that the government thinks so too.”