A budget for our time?
By Adam Bernstein
It takes a brave man to become Chancellor of the Exchequer and then, within 27 days, present a budget at a time of global crisis brought on by the smallest of enemies, a virus.
But Coronavirus is proving to be a moveable feast and so changes, and other forms of help, are coming thick and fast. Indeed, just six days after the budget the Chancellor announced another £330bn of assistance.
Even so, Mr Sunak started with support for those who cannot work while helping businesses that are struggling through no fault of their own. His measures follow on from the Bank of England’s surprise immediate 0.5 per cent cut in interest rates to 0.25 per cent and billions of pounds of extra lending to help banks support otherwise healthy SMEs.
Mr Sunak carried on, saying that aside from those absent from work who will receive Statutory Sick Pay (SSP) from day one, those who self-isolate regardless of showing any symptoms will get the same. And the self-employed eligible to claim Contributory Employment and Support Allowance will be able to claim from day one too.
Businesses with fewer than 250 workers can now obtain a full refund of SSP for 14 days per worker; HMRC is to scale up its Time to Pay scheme for firms in trouble; and a new, temporary, Coronavirus Business Interruption Loan Scheme with £1bn in funding, which originally was to offer loans of up to £1.2m to SMEs facing difficulties, but was subsequently increased to £5m, the first six months to be interest free. Large firms were given cashflow protection via a new Bank of England scheme – the Covid-19 Corporate Financing Facility.
SMEs in the retail, leisure or hospitality sectors that have premises with rateable values below £51,000 were originally granted a suspension of business rates for one year. That was later altered to include all firms in the sectors listed. Firms in the leisure sector were also given confirmation that they could claim on their insurance for the shutdowns… but only if their policy supports the event.
And any business currently eligible for small business rates relief was to be provided with a £3,000 cash grant. That too was changed so that it now stands at £10,000. And on top of that a further £25,000 in grants is to be given to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value over £15,000 and below £51,000.
In terms of the National Living Wage (NLW), that will increase by 6.2 per cent from 6 April. However, the Chancellor went further and announced that the Low Pay Commission has been asked to ensure that NLW reaches 66 per cent of median earnings – more than £10.50 an hour – by 2024. Further, the National Insurance threshold will rise from 6 April to £9,500 from £8,632. And for those experiencing mortgage payment difficulties, they will be able to take advantage of a three-month mortgage payment holiday.
Following on from the government’s pledge to review the efficacy of Entrepreneurs’ relief, the Chancellor announced that it’s to be restricted so that it offers a lifetime allowance of just £1m compared to £10m previously. The predicted savings will be redirected to business via, among things, a rise in the Structures and Buildings Allowance from two to three per cent, and an increase in the Employers Allowance to £4,000.
On environmental issues, the Chancellor announced that from April 2022 the levy on electricity will be frozen while that placed on gas will rise; and a new Plastic Packaging Tax of £200 per tonne will be applied to plastic packaging where less than 30 per cent recycled plastic content is used. And there’s to be money for greener and cleaner transport options to make it less expensive to buy lower emission vans and cars as well as pay for more rapid charging hubs.
Gigabit broadband is to be rolled out nationwide at a cost of £5bn, and £510m will be spent on creating a shared 4G network so that 95 per cent of UK will be covered. And for roads, Mr Sunak noted that there would be “over £27bn of tarmac” through a strategic fund alongside £2.5bn over five years to fix potholes.
To ease the pressure on NHS funding the planned cut to Corporation Tax has been shelved – it remains at 19 per cent. And there’s also extra funding for HMRC to reel in an expected £4.4bn in additional revenue.
And businesses caught by the Making Tax Digital (MTD) regime for VAT will welcome the Chancellor’s plans to evaluate MTD’s introduction before (if) it’s rolled out further.
So, the Chancellor has combined election pledges with pragmatism in helping the country fight Coronavirus. The question is – is the government storing up economic problems for the future or is it hedging on the basis of interest rates will be low for some time?