Delivering his first Budget as Chancellor, Rishi Sunak addressed the short-term challenges of coronavirus to the UK economy with a series of fiscal measures worth £30bn to support the UK’s public services, people and businesses.
He also announced a long-term investment strategy with a plan for £640bn of gross capital investment in transport, health, energy and digital infrastructure between 2020 and 2024. Additionally, the Government also laid out plans to meet its net-zero sustainability commitments.
Measures intended to bolster the UK against the coronavirus crisis include:
- A COVID-19 response fund worth £5bn to support the NHS and other public services.
- Statutory Sick Pay (SSP) will be temporarily paid from the first day of absence rather the fourth day for individuals with COVID-19, and for those instructed to self-isolate. Those ineligible for SSP will be able to claim benefits quicker through changes to Employment and Support Allowance and to Universal Credit.
- SMEs will be able to claim back SSP from the Government, subject to certain conditions (eg, two weeks of SSP per employee).
- HMRC’s Time to Pay scheme will be scaled up, with a COVID-19 helpline. There will be a temporary Coronavirus Business Interruption Loan Scheme to support up to a further £1bn lending to SMEs.
Sunak also revealed £27bn of investment in roads, £510m for a shared rural mobile phone network, a £5bn investment in gigabit broadband for remote areas of the UK and £500m for rapid charging hubs for electric cars.
There will also be an increase in public R&D investment to £22bn per year by 2024-25, while the funding of the British Business Bank’s Start-Up Loans programme will be extended to the end of 2021-22. The Government will provide the British Business Bank with the resources to make up to £200m of additional investment in UK venture capital and growth finance in 2020-21.
Few tax measures were announced in the speech, with the headline announcement the widely-trailed lowering of the threshold for entrepreneur’s relief to £1m. The Government also announced that it will publish an evaluation of Making Tax Digital for VAT, along with related research, before rolling out the initiative to further taxes, while postponed accounting for VAT will be introduced with effect from 1 January 2021.
‘One of the most extraordinary Budgets in recent memory’
Responding to today’s Budget statement, Michael Izza, ICAEW Chief Executive, said: “We’re pleased that the Government used this Budget to respond to the immediate challenges posed by Covid-19, and the measures announced will be of great relief to businesses worried about its impact.
“More widely, this Budget reflected a number of our priorities, including encouraging business to work that bit harder to meet their sustainability responsibilities.
“Overall, this was one of the most extraordinary Budgets in recent memory, with a rate of borrow and spend that no one would have imagined possible from a Conservative government. The dramatic increases in public spending will be welcomed by many, but we must remain conscious of longer-term levels of debt.”
Iain Wright, Director for Business and Industrial Strategy, at ICAEW commented: “In the short-term, businesses will be greatly assured by the government’s £30bn pledge to support the UK economy during the coronavirus crisis. New measures announced by the Chancellor working closely with the Bank of England, such as the temporary relief on business rates and the coronavirus loan scheme, will hugely benefit smaller firms, particularly in terms of managing cash flow at a time of abrupt falls in demand.
“Meanwhile, the long-term commitment to investing in start-ups, scale ups and research and development is encouraging, as is the desire to level up spending across the country. Powering up the low carbon economy is a genuinely game-changing opportunity for businesses, which will lead to new markets and new forms of prosperity, as well as being sustainable. This determination for government to work closely with business should increase productivity across the country, with consequent real increases in the standard of living for all.”
Alison Ring, ICAEW Public Sector Director, commented: “The Chancellor announced a major loosening of the taps on spending and investment in his first Budget today, with a combination of a short-term fiscal stimulus to fight the coronavirus, higher spending on public services, and a major programme of new infrastructure investment.
“Those wondering where all the funding for this planned spending will come from may be surprised to discover that the Chancellor has not followed the usual tradition of post-general election tax rises, but instead has decided to take advantage of ultra-low interest rates to borrow more than £330bn over the next five years. Public sector net debt is expected to reach £2.0tn by 2025, although the Government will hope that this will then be falling as a ratio to the size of the economy.
“Nevertheless, it is a Budget that many will be pleased with, even if a little surprising coming from the traditional champions of small government.”
Commenting on the tax measures announced Frank Haskew, Head of Tax at ICAEW, said: “The lowering of the threshold for entrepreneur’s relief to £1m was widely expected. It’s a reasonable change which almost equalises it with the lifetime pension limit, and £1m is the level it was originally brought in at when it was first introduced.
“We’re pleased the government will evaluate the introduction of Making Tax Digital for VAT, as we think there needs to be a cost-benefit review before it is rolled out further.
“We’re also pleased to see that postponed accounting for VAT will be introduced with effect from 1 January 2021. We believe it will offer a welcome simplification for businesses that import goods into the UK, and will assist their cash flow rather than them having to pay VAT upfront.”