Rishi Sunak Vows To Do "Whatever It Takes" To Protect Economy With Budget Including Corporation Tax Rise And Covid-19 Recovery Spending
The Chancellor said he would use his "fiscal firepower" to help the economy recover
The Chancellor has announced a range of new financial measures to help support businesses recover from the Covid-19 pandemic, but revealed a major increase in corporation tax would be introduced to pay for it.
Rishi Sunak has set out his three-point plan for helping the economy recover from the impact of the pandemic, vowing to use the full "fiscal power" to "protect the jobs and livelihoods of the British people".
Delivering his update in the Commons, Sunak said the pandemic had "fundamentally altered" the way of life in the UK as he vowed to do "whatever it takes" to protect the UK economy.
"This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people," he said.
"First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
"Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that. And, third, in today’s Budget we begin the work of building our future economy."
It comes almost a year after the first lockdown was announced which prompted one of the biggest programmes of economic intervention ever in British history. Almost 11 million people have had their wages paid by the state as a result of the furlough scheme, while firms have received billions in grants, loans and other financial support.
The impact of those measures have resulted in soaring borrowing – more than £270bn this financial year - pushing the national debt to a record £2.1 trillion.
One of the biggest announcements from the fiscal set piece was Sunak's announcement that the furlough scheme would be extended until September in an effort to protect jobs as lockdown is lifted.
But the Chancellor said the level of support would be tapered from July, with employers expected to pay more towards the cost of salaries. From July, firms will be required to pay 10% of a furloughed employee's wages, increasing to 20% in August and September once the lockdown restrictions are lifted.
Self-employed workers will also get additional support from a fourth grant offered under the Self-Employment Income Support Scheme (SEISS) which will provide them with 80% of three months trading profits up to a maximum of £7,500.
It is expected more people will be able to take advantage of the scheme after it was announced that tax return data would be accepted by the scheme.
But Sunak also pushed ahead with plans to increase corporation tax, paid on company profits, to 25% from 2023, saying it was "fair and necessary to ask them to contribute to our recovery" after receiving a £100bn of support during the pandemic.
"Even after this change the UK will still have the lowest corporation tax rate in the G7 – lower than the United States, Canada, Italy, Japan, Germany and France. And we’re also introducing some crucial protections," he said.
"First, this new higher rate won’t take effect until April 2023, well after the point when the OBR expect the economy to have recovered. And even then, because corporation tax is only charged on profits, any struggling businesses will, by definition, be unaffected."
But he said businesses with profits of £50,000 of less would be protected, introducing a Small Profits Rate which would maintain corporation tax at 19%.
He said the increase in corporation tax would be tapered, meaning only those companies with profits above £250,000 would pay the full 25% rate. Meanwhile, Sunak also confirmed the £20 uplift in Universal Credit would be kept in place for another six months after lobbying from Labour MPs and some Conservative backbenchers.
Those who are on Working Tax Credits will get equivalent support to the uplift. Rather than getting the weekly uplift for the next six months, they will get a one-off payment of £500.
A new "restart grant" scheme will provide £5bn in additional funding for high street shops and hospitality companies to help them get back on their feet after lockdown.
Sunak said firms could receive as much as £18,000 each, with nearly 700,000 shops, pubs, hotels, gyms and other businesses eligible for the support. The scheme, which will be awarded directly through local authorities, will replace the monthly grant scheme which is currently providing financial support to firms.
The Chancellor has also promised a "shot in the arm" for the vaccine programme by providing a further £1.65bn in funding. He said it would help support the government's plans to offer every adult in England a first dose of the vaccine by the end of July.
Sunak also announced a new mortgage guarantee scheme which will bring back 95% mortgages in a bid to help those with small deposits get on the housing ladder.
Under the plans, people looking to purchase any home worth up to £600,000 will be able to apply for a mortgage with just a 5% of deposit, with the Treasury offering lenders a guarantee
Small and medium-sized businesses will also receive additional financial help in the form of a £520m scheme to help fund tech upgrades and management training.
In a bid to help boost British firms as they emerge from the pandemic, as many as 130,000 SMEs will receive management training and tech advice from leading business schools.
Part of the plan will also give companies the ability to apply for vouchers worth up to £5,000 to purchase government-approved software with a 50 per cent discount.
Sunak said the fund would be "vital" for firms to receive access to the "tools they need to succeed" as they return.
Meanwhile, Sunak gave a further £408m to help support museums, theatres and galleries to reopen when lockdown restrictions are eased. The additional cash will be added via the Covid Recovery Fund, which will be increased from £1.57bn to £1.87bn. £90m will go to museums while local cultural projects will benefit from an £18.8m cash injection.
Following growing concern that pubs could be particularly hit by the impact of the ongoing lockdown, Sunak announced a new £150m fund to help fund community takeovers of those most at risk of closure.
The fund will give community groups the opportunity to bid for up to £250,000 of matched funding to help them purchase local pubs which would then be run as community-owned firms.
Meanwhile, "exceptional" cases could see the funding raised to £1m to help community groups buy local sports clubs at risk of ruin as a result of the pandemic.
A £300m summer sports recovery fund was also announced with a “significant chunk” expected to go to English cricket. Further announcements on how the money will be allocated are due in the following weeks, but it is expected the fund will work in a similar fashion to a similar cash boost announced in November - known as the Winter Survival Package - to help certain sports.