Rishi Sunak announced £ 65 billion (U.S. $ 91 billion) to extend emergency support measures to workers and businesses.
Announcing the budget on Wednesday, March 3, 2021, the Chancellor to Exchequer for United Kingdom (U.K.) – Rishi Sunak pledged another £ 65 billion (U.S. $ 91 billion) to extend emergency support measures to workers and businesses.
The Government will also hike taxes on its biggest companies in 2023 as it aims to restructure the debt. As per the data shared by Office of National Statistics, U.K. had borrowed £ 400 billion (U.S. $ 558 billion) in stimulus during the crisis. With this, Government total debt has soared to £ 2 trillion (U.$. 2.8 trillion), or close to 100% of Gross Domestic Product (GDP).
The GDP fell nearly 10% over the course of 2020, returning the economy close to the size it was in 2013. The U.K. witnessed the worst economic slump in more than 3 centuries. Besides, the Brexit added to the pains of the economy.
Speaking in the Parliament, Sunak said, “Just as it would be irresponsible to withdraw support too soon it would also be irresponsible to allow future borrowing and debt to be left unchecked.”
He further added, “It’s going to be the work of many governments over many decades to pay it back.”
Besides, the ongoing nationwide lockdown imposed on January 5, 2021, is expected to hit the economy hard in the first quarter of 2021.
Taking it to twitter, Sunak tweeted,
An important moment is upon us. A moment of challenge and of change.
— Rishi Sunak (@RishiSunak) March 3, 2021
Of difficulties, yes, but of possibilities too.
This is a Budget that meets that moment. '👇https://t.co/5zRdJ6Ycpa
Sunak said the hike corporate tax would still be below the level in most major economies. The revised rates will take effect from April 2023 and will only apply to companies with annual profits of £ 250,000 (U.S. $ 349,000) and above, affecting 10% of businesses. Companies having profit below £ 50,000 (U.S. $ 69,800) per year will continue to be taxed at the lower rate.
There are fears that the hike in tax could make Britain less competitive and ultimately undermine the economic recovery. With Brexit, a lot of companies have started moving their base from London to elsewhere in Europe.
Sharing his thoughts, the Director General of the Confederation of British Industry – Tony Danker said, “Moving corporation tax to 25% in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the U.K.”
Alongside tax hikes, Sunak has also announced incentives to boost business investment over the next 2 years. He has also extended reductions in sales and other business taxes until the end of September, with relief for hospitality, tourism and leisure businesses sustained into next year.
Separately, the Government will extend its jobs support program for a third time and keep enhanced welfare payments in place. Sunak pledged to keep subsidizing wages of workers on furlough until September, with businesses asked to contribute to costs starting in July.
Extending the furlough scheme, Sunak tweeted,
To protect the jobs and livelihoods of the British people through the remaining phase of this crisis, the furlough scheme will be extended until the end of September. #Budget2021 pic.twitter.com/q48eo1ppqI
— Rishi Sunak (@RishiSunak) March 3, 2021
The unemployment is expected to peak at 6.5% during the last quarter of the year, down from the 7.5% of previous forecast.
The pandemic costed more than 700,000 people their jobs and left roughly 4.7 million people relying on the State to pay the bulk of their salaries.
He also set out plans for his recently announced £ 5 billion scheme, “Restart Grants”, to help High Street shops and hospitality firms in England recover from the economic setback of Coronavirus (COVID-19) led lockdowns. The grants, worth as much as £ 18,000 per firm, will help shops reopen as England eases lockdown.
Sunak also gave benefits to health industry. He announced £ 1.65 billion to support the U.K.’s vaccination rollout and £ 50 million to boost the U.K.’s vaccine testing capability. Another £ 19 million have been granted for domestic violence programmes and funding network of respite rooms for homeless women. A £ 10 million support has been extended to armed forces veterans with mental health needs.
To support arts and museums, £ 400 million will be given to help arts venues in England, including museums and galleries, re-open. A package of £ 300 million has been announced for professional sport and £ 25 million for grassroots football. To help stage delayed Women’s Euros football tournament in England in 2022, a fund of £ 1.2 million has been allowed.
He also announced a new U.K. Infrastructure Bank to be set up in Leeds. It will have £ 12 billion in capital, with aim of funding £ 40 billion worth of public and private projects. A corpus of £15 billion has been made in green bonds, including for retail investors, to help finance the transition to net zero by 2050.
