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State of finances update

• 700,000 have lost their jobs
• Economy shrunk by 10%
• Borrowing highest its been outside of wartime
• OBR now forecasting a “swifter and more sustained recovery” than expected in Nov – 6 months quicker return to ‘normal’ than predicted
  • 2021: 4% growth
  • 2022: 7.3%
• Unemployment at 6.5% – lower than 11% predicted (1.8 million)

Step 1 – protecting jobs and livelihoods

• Furlough scheme extended to end of September at 80% until the scheme ends
  • From July, businesses will contribute 10%
  • 20% from August and September
• Self-employed to get to more grants up to 80%
• “Fair to target support most affected by pandemic” – those with 30% lower turn over will get the full grant, less than such a fall will receive a 30% grant
• Self-imployed scheme extended to newly self-employed people who registered a tax return in 2019-20
  • An increase of 600,000 eligible
  • £33bn support provided to self-employed
• Low-income households will receive the £20 per week UC boost for an extra 6 months with a one-off payment of £500.
• National living wage rise to £8.91 from April
• Doubling of incentive payment to £3000 for every new apprentice hire, £126m to triple the number of traineeships
• Extra £19m for domestic abuse support
• Extra £10m for veterans with mental health conditions
• Businesses will receive a new restart grant in April to get businesses re-open, retail up to £6000 per premises for retail. Hospitality and gyms will get up to £18,000 when they re-open
• £700m to support arts, culture and sporting institutions
• New recover loans to replace bounceback loans scheme, businesses can apply for loans from between £25,000 up to £10m
• Business rates holiday will continue through to the end of June
  • Remaining nine months will be discounted by 2/3rds
  • £6bn tax cut for business
• 5% reduced rate of VAT extended for 6 months to end of September, 12.5% for the next 6 months. 20% will resume next April.

Housing

• New mortgage guarantee. Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages.
  • Up to home values of £600,000
  • Lloyds, Santander, Barclays and HSBC will be offering the guarantees from next month

TOTAL NEW COST: An extra £65billion measures just announced over 2021 and 2022

Step 2 – Dealing with spending

• Borrowing predicted to fall to 4.5% of GDP next year
• Underlying debt rises to 93% next year, peaking at 97.1% in 2023/24
• Need fiscal freedom for future crises, so must deal with this debt now

2 new measures:

• Not going to raise the rates of Income Tax, NI or VAT
• Freezing of personal tax thresholds from 2022 to 2026
  • Both the lower and £50,000 rates
• Inheritance tax, pensions lifetimes allowance, capital gains tax and VAT registration threshold also frozen
• Tackling fraud with £100m to set up a new 1000-strong HMRC avoidance and evasion taskforce
• Corporation tax in 2023 paid in profits will increase to 25%
  • Won’t take effect until April 2023
  • “Any struggling business will, by definition, be unaffected”
  • £50,000 or less profits will be taxed at the current rate of 19%
  • Around 70% of companies will be completely unaffected
  • £250,000 and over only will be taxed at the 25% rate, the in-between will be tapered
• Tax treatment of losses to become more generous, allowing businesses to carry back losses of up to £2m by up to three years
• Alcohol duties frozen for a second year in a row
• Fuel duty rise cancelled

Rabbit out of hat:

• The super deduction
  • Next 2 years when companies invest they can reduce their tax bill by 130% of the cost
  • E.g. a construction firm buying £10m of equipment could reduce their tax bill by £2.6m. With the super deduction, they can now reduce it by £13m

Stage 3 – building a better economy:

• First-ever UK infrastructure bank, based in Leeds
  • Beginning this Spring it will start with £12bn capital
• Off-shore wind
  • New port infrastructure in Teesside and Humberside
• All UK savers will get the chance to support green projects
• UK productivity will be addressed via “Help to Grow”
  • Tens of thousands of business will be able to get management training
  • Government contributing 90% of costs
  • Help to Grow Digital – Small business will develop digital skills and a 50% discount on new productivity-enhancing software. Beginning in Autumn.
• Two new consultations on R&D tax relief and incentives
  • New visa reforms aimed at highly skilled migrants in STEM, and entrepreneurs
• Protecting the union:
  • Majority of today’s budget measures will apply directly to people in all 4 countries
  • 4 new Scottish specific projects, 3 in Wales and the New Deal for Northern Ireland
  • Barnett formula increase £1.2bn in Scotland, £740m in Wales, £410m in NI
• New Treasury Darlington campus announced
• New Freeport announcement, launching in Teesside, East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent and Thames
  • With simpler planning
  • Cheaper customs
  • Tax breaks to encourage construction and private investment

-ENDS-