The Chancellor yesterday set out a £12 billion action plan in response to the economic impact of the coronavirus (COVID-19) outbreak, as part of a Budget that ‘delivers historic levels of public investment, levels up the country and lays the foundations for a decade of growth’.
Chancellor of the Exchequer Rishi Sunak said Britain will rise to the challenge of COVID-19, with a package of measures to support public services, individuals and businesses that may be affected by the outbreak.
In addition to responding to the immediate impact of COVID-19, the Chancellor pledged to put hardworking people first, put more money in their pocket, invest a record amount in infrastructure, boost public services, back business and set out a vision for a greener future.
A record half a trillion pounds (£640 billion) will be invested in Britain’s roads, railways and digital networks to give us the infrastructure that will support economic growth.
The Budget also provides billions of pounds to support our world-class public services; with funding for 50,000 more nurses and 50 million more GP surgery appointments a year.
Millions of families will have more cash to spend thanks to tax cuts through an increase in National Insurance thresholds and a cash boost to the National Living Wage (NLW). The Budget also takes action to support businesses of all sizes and accelerates the UK’s progress towards a greener economy. The Comprehensive Spending Review, which will set out the government’s detailed spending plans for this Parliament, was also launched today and will conclude in July.
Delivering the budget in Parliament Chancellor of the Exchequer Rishi Sunak said: “This Budget responds, at scale, to the immediate threat of Coronavirus and it reports on an economy whose foundations are strong. It is a Budget that provides for security today.
“This is a Budget that will deliver on our promises to the British people and it is the budget of a government that gets things done.
“We’re at the beginning of a new era in this country. We have the freedom and the resource to decide our own future.”
COVID-19
The Chancellor pledged to do ‘whatever it takes’ to support the economy through the disruption caused by COVID-19 with a £12 billion package of targeted measures. It included a £5 billion emergency response fund to support the NHS and other public services, £40 million of new funding for rapid research into COVID-19 and a commitment of up to £150 million to the International Monetary Fund’s Catastrophe Containment and Relief Trust.
To support people affected, the Chancellor announced the government would be extending Statutory Sick Pay (SSP) for all those who are advised to self-isolate and their carers – even if they haven’t yet presented with symptoms. Statutory Sick Pay costs for businesses with fewer than 250 employees will be met by the government in full for up to 14 days.
Rishi Sunak also set out plans to support the self-employed, those earning below the Lower Earnings Limit of £118 per week and a new £500 million Hardship Fund to directly support vulnerable people. The government will also increase the Business Rates retail discount to 100% for one year and expand it to the leisure and hospitality sectors.
Public services
By the end of the Parliament, day to day spending on public services will be £100 billion higher in cash terms than it is today. This Budget commits more than £6 billion of new funding in this Parliament to support the NHS, including to create 50m more GP surgery appointments, ensure there are 50,000 more nurses. The NHS Settlement provided the largest cash increase in public services since the Second World War – an additional £33.9 billion per year by 2024.
Levelling up and getting Britain Building
Billions of investment will be provided across the length and breadth of the country to support communities poorly served by old roads, communications and housing:
- more than £27 billion will be spent on upgrading strategic roads and £2.5 billion will be spent on fixing potholes
- £5 billion will go towards the rollout of gigabit-capable broadband in the hardest to reach areas
- following the recent floods, which devastated parts of the UK, the Chancellor has pledged a record £5.2 billion over six years for flood defences
Cost of living
The Chancellor also put more money into the pockets of 31 million working people thanks to National Insurance Contribution thresholds increasing to £9,500, saving the typical employee around £104 a year from April, while the National Living Wage will increase to £8.72. This is on top a freeze in Fuel Duty, for the tenth consecutive year, and a freeze in duty rates for beer, cider and spirits, while the ‘Tampon Tax’ will be scrapped.
Backing Business
From April, small businesses will benefit from an increase to the Employment Allowance, reducing their employer National Insurance bills by £850 on average and there will be fundamental review of business rates.
Greener economy
To accelerate the UK’s progress towards net zero carbon emissions by 2050 and protect the environment for future generations, the Chancellor announced £500 million for electric car charging infrastructure, to ensure drivers are never further than 30 miles away from a rapid charger. Tree planting in England will increase by 600% and to tackle the scourge of single-use plastics, a consultation will be launched on introducing a Plastic Packaging Tax.
Support for the regions and nations
The Chancellor has also pledged to level up all parts of the UK, with measures to spread opportunity and ensuring everyone benefits from growth. He announced the West Yorkshire Devolution Deal, which will help the region boom through the creation of a Mayoral Combined Authority, while a government economic decision-making hub will be created in the North of England.
As a result of the budget:
- the Scottish Government will benefit from a £640 million funding boost
- the Welsh Government a £360 million funding boost
- the Northern Ireland Executive a £210m funding boost
Scottish Secretary Alister Jack said: “This is a great budget for Scotland. Decisions taken by the UK Government over the last year will deliver an almost £2 billion funding boost for the Scottish Government.
“People and businesses right across Scotland will see the benefits – more than £5 billion for broadband and 4G connectivity, an increase in the national living wage, £22 billion for research and development across the UK, and a freeze in fuel duty.
“The Scotch whisky industry gets a welcome boost, with a freeze on spirits and a review of alcohol duty, and £10 million help to develop green technology. We will also invest £1 million in promoting Scottish produce to overseas markets.
“We will continue our extensive investment in growth deals across Scotland, now at almost £1.5 billion, with confirmation of £25 million UK Government funding for Argyll and Bute. Every part of Scotland will be covered by growth deals, with investment to be announced soon for Falkirk and the Scottish islands.”
Following decisions taken at this Budget, notably on funding for health business rates relief and roads, the Scottish Government’s resource and capital budgets in 2020-2021 will increase by over £220m and £410m respectively with a total increase of more than £640m.
The additional funding, when combined with the £1.3bn funding in 2020-21 provided at the Spending Round 2019, results in the largest year-on-year real-terms funding increase for the Scottish Government in a decade.
Further measures announced by the Chancellor can be found in this factsheet.
BUDGET REACTION
Rapid joint engagement is needed on funding for the COVID-19 response in Scotland following the UK Government’s Budget, Holyrood Finance Secretary Kate Forbes said.
Responding to the UK Budget, Ms Forbes said: “While I’m pleased to see the UK Government’s economic response to coronavirus following my calls for this at the UK Treasury yesterday, we need confirmation on what this will mean for Scotland.
“We require urgent clarification on what funding Scotland will receive from the announcements made by the UK Government, at a time when the prospects for the economy and public finances remain very uncertain as the short term impacts of COVID-19 unfold.
“It is vital that our businesses, employees, health service and the most economically vulnerable in our society are all protected through this time, and this additional funding will help us in our response.
“I will ensure that businesses in Scotland are supported and will work with the business community to identify the most effective measures available to us, when we have more clarity on the funding available.
“We expect full consequentials from this additional funding and need urgent clarification to provide clarity for Scottish businesses and NHS Scotland to ensure we can respond effectively.
“The Barnett consequentials announced today are in line with the assumptions that underpinned the Scottish Budget and Budget Bill passed by the Scottish Parliament last week. While this funding is welcome, our resource budget is still lower in real terms than it was in 2010/11.”
Rebecca Long-Bailey, Labour’s Shadow Business Secretary, commenting on the failure to tackle the climate crisis in the Budget, said: “By ducking the bold measures needed to tackle the climate emergency, the Chancellor has blown the biggest opportunity for national renewal since the post-war era, betraying current and future generations.
“This Budget piles investment into new motorways without bringing down the cost of public transport, and offers only derisory support for electric vehicles. There is no sign of the Tory manifesto commitment to invest £9.2 billion to lower energy bills, and the proposal to load the costs of carbon capture and storage onto consumer bills is particularly concerning.
“Elsewhere the Budget sets out a series of measures that seem designed to let our biggest emitters off the hook.
“The Chancellor says people in this country voted for change, but nobody voted for catastrophic climate change.”
Dame Carolyn Fairbairn, CBI Director-General, said: “In deeply challenging times the Chancellor has worked against the clock to deliver two budgets in one: a first for national resilience today and a second for economic ambition tomorrow. It’s a bold Budget at scale, coordinated with the Bank of England, which will help people and business through tough times.
“As the UK responds to the immediate challenge, people are the first priority. So the measures to expand and ease access to sick pay and benefits are vital to protect people’s health and livelihoods.
“The Chancellor’s actions on business rates, emergency funds and loans will help ensure firms can weather the storm, especially smaller firms. Larger firms may also need support as the situation develops.
“Covid19 will bring new challenges daily which will need to be resolved, at speed. “Today’s impressive economic response should now evolve with business insight to become as agile as our approach to public health.
“While the response to Covid19 is urgent, it is very good to see this Budget’s focus on innovation and infrastructure. The Chancellor has listened to many calls from CBI members, with decisive action on vital long-term issues.
“The significant uplift in R&D funding, creation of a UK version of ARPA, a fundamental review of business rates and spending promises on infrastructure will all bring real benefits to people, business and communities.
“The Chancellor has set out some powerful incentives to get businesses investing, increasing the R&D tax credit and the Structures and Buildings Allowance. The £5bn of new export loans will encourage the best of UK business to look to new global markets.
“The next few months will bring opportunities for the Government to make major decisions that they have understandably had to put to one side today. Some gaps still need to be filled in around skills, energy efficiency and powering the UK’s low carbon future.
“Overall, today’s budget is a powerful signal to firms at home and abroad that the UK can and will manage the immediate challenges and long-term opportunities in parallel.”
TUC General Secretary Frances O’Grady said: “The government’s coronavirus plans will leave millions of workers behind. Without urgent action, too many will be plunged into poverty and debt.
“Today’s announcements won’t help the nearly 2 million people who miss out on sick pay because they don’t earn enough. Telling them to turn to the broken benefits system isn’t good enough. We need decent sick pay for all.
“Ministers must now urgently bring together unions and employers to talk about how to support jobs, including through wage subsidies for short time working schemes, and further help for public services – especially social care.”
On investment announcements, she added: “This spending u-turn is badly overdue. The priority now must be to repair the damage of ten years of Tory devastation.
“Helping working families and rebuilding public services must come first. And we need to see concrete action on the challenges of the future.
“This means banning zero hours contracts, sorting social care, ending the UK’s dire regional inequalities, setting out a credible plan to achieve net zero, and getting an EU trade deal that supports jobs and workers across the UK.”
Fraser Sime, regional director for Scotland at Bank of Scotland, said: “The announcement of £1m support towards Scottish food and drink exports is extremely encouraging.
“We have a team of relationship managers that work specifically with this industry across Scotland to support growth, both at home and overseas, and today’s development will further help local firms capitalise on new opportunities.
“With 120 active distilleries in Scotland, the investment of £10m into the research and development of more sustainable practices will assist the industry in reducing the environmental impact of our national tipple. To support this, our Clean Growth Financing Initiative also offers discounted lending to introduce measures to create more renewable energy sources for businesses.”
Jonathan Carr-West, Chief Executive of LGiU, said: “Understandably, this budget was dominated by the Government’s response to coronavirus. No one could argue with that, but for councils across Scotland it provides more questions than answers.
“Social care has been all but absent in the response to Covid-19. Hospitals will not be able to cope if large numbers of older sufferers cannot be discharged because of a lack of social care provision and social care providers will not be able to cope if a fifth of their already stretched workforce is off sick. This could create a dangerous and vicious circle. Mr Sunak promised “whatever it takes” for the NHS, but once again, risks forgetting the symbiotic relationship between health and social care.
“The Growth Deal in Argyll and Bute, help for whisky distillers and support for a campaign to promote Scottish food and drink will be welcomed by local government across Scotland, but many will be concerned that these are only small steps being taken to reverse the decade of funding cuts experienced in Scotland.
“Elsewhere in the budget, announcements on infrastructure, science, further education and research and innovation all look to a longer term future. Local government must have a role to play in making these happen but there remain questions about its capacity to do so after a decade of contraction.
“So, we had a budget designed to cope with an immediate crisis whilst also setting out significant spending and a vision for a long term economic transformation. Councils will be at the front line of our response to coronavirus and will be a crucial player in this transformation. However, local government may feel that it has dropped through the middle somewhat as the Government attempts to get so many other things done.”
Commenting on the UK Government’s Budget yesterday, Scotland Director for CAMRA Sarah Crawford said: “CAMRA welcomes the freeze in beer duty – which is a UK-wide tax – but we want to make sure brewers and pub companies pass on any savings on to pub-goers.
“In the upcoming review of alcohol taxation we will be arguing for a cut in beer duty for beer served on tap, which would be the best way to support community pubs.
“Yesterday’s Budget also sees cuts and reliefs to the burden of Business Rates for pubs in England. CAMRA is calling on the Scottish Government to introduce further support and pub-specific rate relief schemes here to help our pubs cope not only with the short-term impacts of coronavirus, but also with the year-round effect that business rates have on the ability of our locals to stay open and thrive. We’d also like to see fundamental changes to the Business Rates system to make sure it is fairer to pubs.
“Cutting duty for draught beer in pubs and changing the Business Rates system are both vital steps to saving community pubs across Scotland from closure.”
Nimesh Shah is a Partner at leading accounting and tax advisory firm Blick Rothenberg. He summed the Budget:
“Today marked the first Budget for the new Government, the first for a new Chancellor who has only been in the job a few weeks and the first for almost 18 months. It could, however, be the first of several budgets in 2020.
“In a Budget overshadowed by COVID-19, the Chancellor started by announcing a package of measures aimed at easing the burden for individuals and businesses, including extending Statutory Sick Pay, offering a reduction to Business Rates for small businesses and allowing more time to pay taxes.
“The Chancellor’s hands seemed to be slightly tied, and the only notable change for workers was an increase to the National Insurance threshold to £9,500 providing a £100 annual saving.
“For the first time in 10 years, there was no increase to the personal allowance, which remained at £12,500. In fact, there were no changes to the majority of the personal tax thresholds with the basic rate band, inheritance tax nil rate band and the high-income child benefit threshold all untouched.
“In a measure aimed at appeasing NHS doctors and consultants, the pensions annual allowance will only begin to reduce for individuals with income above £240,000 (currently £150,000). However, at the other end of the spectrum, the minimum pensions annual allowance will be reduced to £4,000 (currently £10,000), affecting individuals with income above £300,000.
“The Chancellor wielded an axe on Entrepreneurs’ Relief without going as far as abolishing it completely. In an overnight move (which has its own complexities), the Entrepreneurs’ Relief lifetime allowance was slashed from £10 million to £1 million, reducing the tax saving to £100,000. Apparently, the reduced limit should only affect 20% of entrepreneurs while raising £6.3 billion for the Treasury in the process over the next five years.
“Entrepreneurs’ Relief has gone full circle, as the limit was £1 million when first introduced in 2008 and worth £80,000. At a time when all UK businesses are facing hugely uncertain futures, it was disappointing that the Chancellor, only a few weeks into the job, decided to make the move without any review or consultation.
“For the first time in many years, there were few changes to property taxes, with the Government moving ahead with a 2% SDLT surcharge for overseas buyers, which will take effect from April 2021 (presumably to encourage overseas buyers to transact before a higher SDLT cost applies).
“However, it’s worth noting that several property tax changes are due to take effect from 6 April 2020, including a reduction to main residence relief, the mortgage interest relief restriction taking full effect and reducing the timeframe in which capital gains tax should be paid to 30-days when selling a residential property.
“The only giveaway for savers was an increase to the Junior ISA limit to £9,000. At a time when the stock markets have tumbled and interest rates cut, pensioners and savers may have been looking to the Government for some help.”
This year’s winners and losers: who will be better off?
George Parker and Harriet James are Assistant Managers at leading accounting and tax advisory firm Blick Rothenberg
Winners
All earners
An increase in National Insurance Contribution (NIC) thresholds is a welcome move for all employees and the self-employed. The threshold will increase from £8,628 to £9,500, resulting in an annual NIC saving of £104 for employees and £78 for the self-employed.
Saving for retirement
From 2020-21, the thresholds used to calculate the tapering of the annual allowance will be increased so that workers with ‘adjusted net income’ of below £240,000 are not affected by the reduced limits.
The annual allowance is the total amount an individual and employer can contribute into their pension fund without incurring a tax charge.
Children under 18 years old
Junior ISA and Child Trust Fund annual subscription limits will increase by £4,632 from £4,368 to £9,000 – a massive uplift.
Losers
Entrepreneurs
Entrepreneurs Relief (ER) Lifetime Allowance will be reduced from £10m to £1m affecting an estimated 20% of business owners. Going forward, only the first £1m of capital gains arising on the sale of an individual’s business will be taxed at 10%, with the remaining gain being taxed at 20%. Harsh anti-avoidance rules have also been introduced, backdated from April 2019.
Top earners
Currently individuals with an ‘adjusted net income’ in excess of £210,000 have their annual allowance tapered to £10,000. From April 2020, the allowance will be tapered to £4,000 for individuals with total income above £300,000. Any excess contributions over the new tapered annual allowance will be subject to tax at 45%.
Companies investment in plant and machinery
The favourable – yet temporary – Annual Investment Allowance (AIA) of £1million will come to an end on 31 December 2020, reducing by 80% to £200,000 per year.
Pensioners
The forgotten in this Budget are pensioners. With no reforms or simplification to Inheritance Tax announced, with the personal allowance and income tax thresholds remaining unchanged, and as they do not pay NIC, inflation will drag more pensioners into higher taxes. Based on forecasted inflation at 2%, many pensioners will be worse off in real terms.
