Rishi Sunak has unveiled a swathe of measures designed to “unite and level up” the country as lockdown lifts in his Spring Budget, including extensions to the business rates holiday, the furlough scheme and the stamp duty exemption.
The chancellor said the government would continue to do “whatever it takes” to support British people and businesses, but also introduced a series of tax rises and warned that it would be “irresponsible” to allow borrowing to go unchecked.
The plans will take total government spending on the Covid crisis to more than £400bn. “It’s going to take this country, and the whole world, a long time to recover from this extraordinary situation,” the chancellor said.
The cut to business rates will be extended until the end of June, then discounted by up to two-thirds for the remaining nine months of the financial year up to a value of £2m for firms forced to remain closed.
Meanwhile, companies will be able to lean on the furlough scheme until the end of September, in a move which industry groups have said will help keep retail tenants afloat.
Support will begin tapering off from July, when employers will be asked to start contributing 10% to workers’ salaries. That figure will increase to 20% in August and September as the economy reopens.
Furlough has thus far cost the government £54bn, with more than 11m workers relying on the scheme since April last year.
Sunak also announced a “super-deduction” to incentivise business investment, which will mean firms can reduce their taxable income by 130% of the amount they invest.
However, the chancellor also risked the ire of big business by hiking corporation tax from its current level of 19% to 25% from April 2023.
He added that the rate was still the lowest of any of the G7 nations, and that companies with profits of £50,000 or less will still only pay the current 19% rate. Companies with profits of £250,000 or more will pay the full 25%. The Labour Party called for a rate of 26% in the 2019 General Election.
“It’s a tax rise on company profits, but only on the larger more profitable companies, and only in two years’ time,” Sunak said.
The tax increases were accompanied by forecasts showing the UK’s Budget deficit would be £355bn for this financial year – the highest since the Second World War and 17% of national income. Next year it will be £234bn – more than one-tenth of GDP.
Other measures included extending the stamp duty holiday until the end of June, extending the VAT cut for hospitality and tourism businesses until September, and the establishment of eight freeports across the country – special economic zones with different rules to make international trade cheaper.
Sunak also threw in £400m of extra funding for museums, theatres and galleries, and confirmed a £5bn grant scheme for high street businesses which was announced over the weekend.
Shops, pubs, hotels and other businesses hardest hit by the pandemic will receive grants worth up to £18,000 each to help them reopen safely. The scheme, implemented by local councils, will apply to almost 700,000 companies.
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