Today, the Chancellor set out the Treasury’s Covid Recovery Plan in the Spring Budget, where he made large spending commitments, both to combat the immediate economic impact of Covid-19 and to invest in the long term recovery. He begun by stating that the economy shrank by almost 10% last year with borrowing at £352 billion; the highest level of borrowing since WW2. Total fiscal support over this year and next amounts to £407 billion.
The Office for Budget Responsibility expects the economy to return to pre-pandemic levels by the middle of 2022, six months earlier than it predicted in November. However, it also forecasts that over the next five years, the economy will be 3% smaller than it would have been without a pandemic.
Please see key points from the Budget below:
BUSINESS SUPPORT & GRANTS
- 100% Business Rates relief will be continued until the end of June for retail, hospitality & leisure . Business Rates will continue to be discounted up to two thirds for the remaining nine months of the tax year. Click here for further clarity on this point
- 5% reduced rate of VAT for hospitality will continue until end of September. After this for a further six months, this will increase to 12.5% and will return to the full amount by April 2022
- A new Restart Grant is launching in April. Non-essential retail & businesses opening in Arpil will recieve up to £6,000 per premises and those reopening later including hospitality and leisure will be able to apply for grants of up to £18,000
- The Recovery Loan Scheme will replace the Bounceback Scheme offeirng loans of £25,000 to £10 million, with Government guaranteeing 80% of the finance to the lender
EMPLOYMENT & PERSONAL INCOME
- The Job Retention Scheme (furlough) will be extended until the end of September 2021 with no change to employees. Following full reopening in July, businesses will be asked to contribute 10% toward salaries
- Current support for self-employed workers will continue
- To support low-income households, the £20 uplift of Universal Credit will continue for a further six months
- Tax Credit claimants will also be given support for the next six months, with a one-off payment of £500
- From April, the National Living Wage will increase to £8.91
- Businesses will be given incentive payments of £3,000 for all new hires, while £126 million will be invested to triple the number of new traineeships
PUBLIC FINANCES & TAXATION
- Corporation tax is to increase to 25% in April 2023. The Small Profits Rate will ensure only businesses with profits of over £250,000 will be taxed at the 25% rate, while small businesses with profits under £50,000 maintaining the current rate of 19%
- Planned increases in duties for alcohol and fuel have been cancelled
- Personal tax thresholds will be frozen from next year at £12,570 for the basic rate and at £50,270 for the higher rate. The inheritance tax thresholds, the pensions lifetime allowance, the annual exempt amount in capital gains tax will also be maintained at current levels
- “Super reduction” for business investment, with 130% of the cost set against tax for two years
- The stamp duty holiday on properties worth up to £500,000 will be extended until the end of June
- 95% mortgages will be guaranteed by the government for those who can only afford a 5% deposit to stimulate the housing market
INFRASTRUCTURE & SUSTAINABLE GROWTH
- The Chancellor announced a new UK Infrastructure Bank opening in Leeds. This will invest in public and private projects to finance a “green industrial revolution” and will have an initial capitalisation of £12 billion.
- £15 billion will be available in green bonds, including for retail investors, to help finance the transition to net zero by 2050
- A new visa scheme has been anounced to help start-ups and rapidly growing tech firms source talent from overseas
- Eight new freeports have been announced with simpler planning, cheaper customs, lower taxes
- 750 UK civil servants to be relocated to a new Treasury campus in Darlington as part of the levelling up agenda
- A £1 billion Towns Fund has been launched to promote regeneration in 45 English towns
CULTURE & SPORT
- An extra £300 million will be added to the government’s £1.57 billion Culture Recovery Fund for the arts and culture sector. Museums and cultural bodies in England will also receive £90 million to keep going until they can reopen. There will also be £18.8 million for community cultural projects
- Sports including cricket, tennis and horse racing will benefit from a £300 million recovery package, and there will be £25 million new funding to support grassroots football
- As Covid-19 vaccinations keep rolling out, an extra £1.65 billion will be allocated to help the government reach its target of offering a first dose to every adult by 31 July. And some of the money will be used for a trial to see if different vaccine doses can be mixed.
KEY GOVERNMENT LINKS
In response to the budget, Chief Executive Jace Tyrrell, commented:
“The Chancellor’s announcement of substantial economic support should be broadly welcomed. However, it delivers too little for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort. Targeted relief and support is needed for centres such as London, Birmingham and Manchester, where recovery will take much longer. It cannot be a one size fits all approach.
“For the Government’s support to be successful, we must also be given more clarity around the issue of state aid in the wake of our departure from the EU so that businesses with multiple stores can be sure that they won’t miss out on funding due to regulations on state aid cap.”
On Business Rates:“This was a budget billed to help business build back and we welcome the three month extension to the business rates holiday that will be a lifeline to many businesses as we reopen. However it delivers too little for major commercial centres missing out on tourism and office workers where rebuilding traffic, trade and tourists will require years of effort. Targeted support now from the public purse will accelerate the recovery of commercial centres such as London and Manchester, halving the time it will take for them to get back to becoming net contributors to the UK economy.”
On State Aid: “The three month extension to the business rates holiday will be a lifeline to many businesses as we reopen, however if business rate relief is to be successful, we must be given more clarity around the issue of state aid so that businesses with multiple stores can be sure that they won’t miss out on funding due to EU regulations on state aid cap.
“In truth, while this has been a generous budget, it remains limited when subject to small print. Unless the Chancellor works to overturn state aid rules, centres such as London and Manchester risk losing their lead as world class destinations to Paris and Milan.”
On International Spend:“The reopening of overseas tourism must be a two-way street; allowing Brits to holiday and spend overseas must be matched by welcoming back priority overseas tourists who account for 50% of the West End’s annual £10 billion turnover. Those that benefit commercial centres the most – in the Middle East, Far East and US – must be encouraged back to boost the British economy and its businesses and we hope to hear more clarity from the Government on this issue in the near future.”