Budget 2021: The key points you may have missed in Rishi Sunak's speech
RISHI Sunak today outlined government spending plans for the year ahead when he announced the Budget for 2021.
The Chancellor faced a difficult balancing act when he set out his Budget, detailing how the government will begin the task of dealing with the black hole in the public finances while also supporting families and businesses hit hard by coronavirus.
Mr Sunak revealed plans to help the country’s economy recover from the unprecedented financial impact of the coronavirus health crisis including financial support, tax plans and a higher minimum wage.
Rishi Sunak said borrowing is on an “extraordinary scale” but that the Government will “rise to that challenge and we can be optimistic about the recovery”.
Here is everything you need to know from Rishi Sunak’s Budget announcement.
The Chancellor said coronavirus has caused one of the “largest, most comprehensive and sustained economic shocks this country has ever faced”.
Mr Sunak used his Budget to set out a £65 billion spending package this year and next year to support the economy as it recovers from the pandemic.
But he warned that the unprecedented spending could not continue and he had to be “honest” about putting the nation’s finances back on a sustainable footing.
According to the Office for Budget Responsibility (OBR), the economy is forecast to grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.
Borrowing is forecast to be £234 billion next year – 10.3% of gross domestic product (GDP), a measure of the size of the economy – but will fall to 4.5% of GDP in 2022-23, 3.5% in 2023-24, then 2.9% and 2.8% in the following two years.
Rishi Sunak confirmed the business rates holiday will be extended until the end of June for hard-hit retail, hospitality and leisure firms before shifting to a two-thirds discount for the rest of the year.
Mr Sunak also told MPs that current VAT cuts for hospitality firms will also be extended for another six months, before tapering back to the previous tax rate.
Non-essential shops and hospitality venues have been particularly heavily hit by the impact of the pandemic and remain shut in the face of the nationwide lockdown.
Retail, hospitality and leisure firms will now see the current business rates holiday – which was due to expire at the end of this month – extended until the end of June, when restrictions are intended to be wound down.
Mr Sunak said: “This year, we’ll continue with the 100% business rates holiday for the first three months of the year – in other words, through to the end of June.
“For the remaining nine months of the year, business rates will still be discounted by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.”
Rishi Sunak confirmed the furlough scheme will be extended to the end of September, as will support for the self-employed.
The Universal Credit uplift of £20 a week will continue for a further six months, well beyond the end of this national lockdown.
A new restart grant will start in April to help businesses reopen, with £5 billion of funding.
The Chancellor said there will be an additional £1.6 billion for the coronavirus vaccine rollout and to “improve future preparedness”.
No tax increase
Rishi Sunak said the Government will not raise the rates of income tax, national insurance, or VAT.
But he added: “Instead, our first step is to freeze personal tax thresholds.”
The Chancellor said: “We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.
“The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.”
Rishi Sunak also told MPs: “Nobody’s take home pay will be less than it is now, as a result of this policy.
“But I want to be clear with all members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation.
“We are not hiding it, I am here, explaining it to the House and it is in the Budget document in black and white. It is a tax policy that is progressive and fair.”
The Chancellor said he did not believe it would be right to increase the rates of tax on working people, telling MPs: “I believe our approach, while bold, is compatible with our duty as a fiscally responsible and business friendly government.
“This is the right choice and I’m confident it will command public assent.”
Housing and stamp duty
Low deposit mortgages will make a comeback next month with a new five per cent deposit home loan guarantee, Rishi Sunak has announced.
The Chancellor also announced a “mortgage guarantee”, telling MPs: “Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a Government guarantee on those mortgages.
“I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.
“A policy that gives people who can’t afford a big deposit the chance to buy their own home. As the Prime Minister has said, we want to turn generation rent into generation buy.”
Under the scheme the Government will offer to take on some of the risk of low deposit loans, meaning lenders would have some protection from potential losses.
On stamp duty, Rishi Sunak told MPs: “I can announce today the £500,000 nil rate band will not end on March 31, it will end on June 30.
“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1.”
Other key announcements
- The minimum wage will increase to £8.91 an hour from April.
- On apprenticeships, the Government is to double the incentive payments given to businesses to £3,000 for all new hires, of any age.
- All alcohol duties are frozen for the second year in a row and the planned increase in fuel duty is also cancelled.
- The UK Infrastructure Bank will be located in Leeds, while the Treasury is to establish a new economic campus in Darlington, the Chancellor revealed.
- Freeports – “special economic zones with different rules to make it easier and cheaper to do business” – will be located at East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.
- There was more funding for the devolved administrations, with £1.2 billion for the Scottish Government, £740 million for the Welsh Government, and £410 million for the Northern Ireland Executive.
- An extra £19 million will be handed to domestic violence programmes.
- Survivors of the Thalidomide scandal will be given a “lifetime commitment” with an extra down payment of £40 million.