LIVE: Reaction to Chancellor Rishi Sunak's Budget as Teesside emerges as Teesside wins freeport status
Rishi Sunak outlined support “to get people through to the other side of the crisis” – with the furlough scheme and other financial lifelines extended as part of his budget.
The Chancellor told ministers the impact of coronavirus on the national finances cannot be ignored, but the UK can be “optimistic about our recovery”, as he updated the Cabinet ahead of this afternoon’s statement.
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LIVE: Chancellor Rishi Sunak unveils 2021 Budget
Last updated: Wednesday, 03 March, 2021, 13:29
- Teesside Freeport plan given green light
- Furlough scheme and support for self-employed to be extended until September
- Government to fund new port infrastructure to build the next generation of offshore wind projects on Teesside
- Sunak says Covid has ‘fundamentally altered’ our way of life
A “new restart grant” will be provided in April to help businesses reopen.
Mr Sunak tells MPs: “Non-essential retail businesses will open first, so they’ll receive grants of up to £6,000 per premises.
“Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we’ll give them grants of up to £18,000.
“That’s £5 billion of new grants, on top of the £20 billion we’ve already provided.”
The Chancellor says some businesses will still need loans to see them through despite the restart grants, telling MPs: “As the Bounce Back Loan and CBIL schemes come to an end, we’re introducing a new recovery loan scheme to take their place.
“Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year.”
The 100% business rates holiday in England will continue from April until 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.
“A £6 billion tax cut for business.”
He says the 5% reduced rate of VAT will be extended for six months to September 30, telling MPs: “Even then, we won’t go straight back to the 20% rate.
“We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until April next year.
“In total, we’re cutting VAT next year by almost £5 billion.”
On stamp duty, Sunak tells 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.”
A new “mortgage guarantee” will be introduced: “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.”
Mr Sunak tells MPs the total Covid-19 support package amounts to £352 billion.
He says: “Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever faced and, by any objective analysis, this Government has delivered one of the largest, most comprehensive and sustained responses this country has ever seen.”
He says the forecasts show that this year the Government has borrowed a “record” £355 billion, the equivalent of 17% of the UK’s national income.
He tells MPs: “Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be £234 billion, 10.3% of GDP – an amount so large it has only one rival in recent history – this year.”
Sunak says borrowing 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 due to action he is taking.
“While underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023/24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast,” he says.
“The amount we’ve borrowed is only comparable with the amount we borrowed during the two world wars. It is going to be the work of many governments, over many decades, to pay it back.
“Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked. When crises come, we need to be able to act. And we need the fiscal freedom to act
“ A freedom that you only have if you start with public finances in a good place.”
Borrowing costs are “affordable right now” but interest rates and inflation may not stay low, he warns.
“This Budget is not the time to set detailed fiscal rules, with precise targets and dates to achieve them by – I don’t believe that would be sensible.
“But I do want to be honest about what I mean by sustainable public finances, and how I plan to achieve them.”
The Government will not raise the rates of income tax, national insurance, or VAT.
But the Chancellor adds: “Instead, our first step is to freeze personal tax thresholds.
“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.
“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.”
Inheritance tax thresholds, the pensions lifetime allowance, and the annual exempt amount in capital gains tax will be maintained at current levels until April 2026, says Mr Sunak.
He adds: “We’ll also tackle fraud in our Covid schemes, with £100 million to set up a new HMRC taskforce of around 1,000 investigators, as well as new measures, and new investment in HMRC, to clamp down on tax avoidance and evasion.”
The rate of corporation tax paid on company profits will increase to 25% in 2023: “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.”
“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.
“Second, I’m protecting small businesses with profits of £50,000 or less, by creating a small profits rate, maintained at the current rate of 19%. This means around 70% of companies – 1.4 million businesses – will be completely unaffected.”