This afternoon, Chancellor of the Exchequer, Rishi Sunak, delivered his first budget and the first budget following last year’s Conservative election victory.
Traditionally packed with big announcements, with details usually being defined over the coming days and weeks, our Director Wayne Glenton details the key headlines and gives his quick reaction. You can also find our full budget summary here.
Last year’s Conservative manifesto made promises on a number of things, including extra NHS funding, more police, investment in schools, achieving a Net Zero carbon position and no increases in income tax, VAT or National Insurance.
On top of all of this, the recent development of coronavirus has made this budget particularly important:
The Coronavirus is of course high on the priority list at the moment. The chancellor announced his three-point plan in response to the fast-developing situation, which ultimately means:
1) The government will spend whatever it takes, whether it will be millions or billions it will be provided in order to cover the response to the virus.
2) Both employed and self-employed people will be assisted if they become ill or self-isolate in accordance with government guidance:
- Employed – As already known, it has been confirmed that Statutory Sick Pay (SSP) will commence from day 1 of sickness instead of day 4. You can get a sick note from the 111 service without having to see a doctor. SSP will be available to everyone self-isolating, even if there are no symptoms.
- Self-Employed – Employment and Support Allowance (ESA) will be available from day 1 of sickness instead of day 8. This process will be made more efficient and the benefit will be made available more readily. In addition, the minimum income floor will be removed from Universal Credit.
3) Small businesses with less than 250 employees will have the first 14 days of sick pay refunded in full by the government. In addition, the time-to-pay arrangements will be scaled up to ease any pressure on cash flow, and 2,000 staff are on standby for these arrangements.
Finally, a new SME Temporary Coronavirus short-term loan has been announced offering up to £1.2m with no fees for SMEs.
Lots of these announcements will be welcomed by Peterborough businesses, a number of whom fall within the less than 250 employee threshold and could benefit from short-term loans.
The main budget
Once the Chancellor had dealt with the key update on the government’s response to COVID-19, he progressed with the main budget – and there were plenty of important announcements there as well:
- The National Living Wage will go to £10.50 per hour.
- In 4 weeks’ time, the National Insurance threshold will be increased to £9,500.
- VAT is set to be removed on female sanitary products.
- The business rate discount for pubs has increased from £1,000 to £5,000 and the planned rise in beer duty cancelled. Cider and Wine duties have been frozen, along with spirits.
- The fuel duty will remain frozen for another year.
- Entrepreneurs Relief currently costs £2bn per year and the government consider it ineffective and unfair. It will not be fully abolished, but the lifetime limit will be reduced from £10m to £1m.
- R&D Expenditure Credit increased from 12pc – 13pc.
- Structures & Buildings Allowance increased from 2pc to 3pc.
- Employment Allowance increased from £3,000 to £4,000.
- The government have promised to ‘invest in ideas’ by increasing R&D investment to £22bn per year.
The environment is forcing itself up the agenda of our politics as the climate change crisis continues to be felt around the world – with Peterborough City Council taking their own action last week. The chancellor spent some time detailing the government’s proposals:
- There will be an increase in taxes on pollution – with Gas and Electricity levies being brought in line.
- Additional taxation is to be introduced on plastic packaging.
- Red diesel is a fuel commonly used to operate off-road vehicles in the construction and agriculture industries particularly. From 2022, the tax relief on using this fuel will be abolished. However, the agriculture industry would be impacted heavily by this and so this sector will retain the relief.
- The government will invest to make it cheaper to buy energy efficient transport – alongside improvements in the infrastructure for green transport solutions.
- Flood defences and spending to be invested in heavily.
- Woodlands and peat farms will get £640m as a ‘nature for climate fund’ and restore 35,000 Ha of peatland.
- £800m invested in 2 or more new carbon capture clusters to be built by 2030.
The infrastructure industry is a regular milestone for the budget – and with the government promising to ‘level-up’ the country in their election last year, there was special interest this year on how the government plans to deliver:
- Capital spending budgets are set to be increased significantly, with finer details to follow – and the government will initiate a review of the countries green belt.
- £222m of new funding for city growth deals, outside of London.
- £5bn investment in Gigabit broadband – to create high coverage across the country.
- HS2 is still going forward and a promise to improve railways.
- A huge £27bn of funding was announced for roadways to create or renovate 4,000 miles of road. There will also be an investment in local roads – with £2.5bn for a local ‘pothole fund’ to tackle any drivers nightmare!
Announcements around education were fewer and broader for the most part:
- Every region will receive additional funding for maths programmes and new sports pitches.
- Additional funding will be provided for secondary education.
- From December 1 VAT on digital production of books and magazines will be abolished – described as the ‘reading tax’.
On housing there were announcements around social housing, rough sleepers and Grenfell:
- Interest rates on social housing funding are to be cut by 1%.
- £650m will be provided in support to help rough sleepers move in to accommodation.
- Grenfell – a new building safety fund of £1bn will be created to ensure correction of all unsafe combustible cladding.
Finally, there were announcements on key public services including the NHS:
- The Immigration health surcharge is to be increased – though there will be a discount for children.
- On mental health support, there will be new national insurance relief for veterans.
- The pension taper will be increased by £90,000. Particularly, helping consultants who are reluctant to return to the NHS for fear that their pensions would be affected.
- Funding will progress on 50,000 new nurses and 40 new hospitals.
- Increased funding for police forces – though the details were vague.
As with every budget, there is a lot of information to follow! But already we can see some interesting discussion points arising. Certainly, the budget appears to be one outlining big spending, but we will need to now look in to the numbers to find those hidden costs that could throw a spanner in the works.