One year ago, we promised the British people we would do whatever it takes to provide security and stability. We are delivering on that promise: over this year and next, we are providing £407bn of support for families, jobs and businesses, more than almost any other country in the world.
Despite this unprecedented support, the damage coronavirus has done to our economy has been acute. Since March, 700,000 people have lost their jobs, the economy has shrunk by 10% – the largest fall on record – and our borrowing is at the highest it has ever been outside of wartime.
Today’s Budget protects the jobs and livelihoods of the British people with a three-part plan:
As the IMF, Bank of England and OBR have all confirmed: our plan is working. As a result of our interventions, unemployment is now estimated to peak at far lower levels than previously expected, and our economy is now forecast to recover faster than previously thought as well.
This Government is supporting livelihoods by extending the Furlough scheme until the end of September. The first part of this Budget’s plan is to protect the jobs and livelihoods of British people through the remaining phase of this crisis, and this Budget delivers on that.
The furlough scheme has supported 11.2 million jobs across the UK, worth £53 billion. But to provide further certainty, we are today extending the scheme until the end of September. And our scheme remains among the most generous of its kind in the world.
This Government is also delivering new Restart grants to help our businesses get going again. Non-essential retail businesses will open first and therefore receive grants of up to £6,000, while hospitality and leisure businesses – including personal care, hairdressers and gyms – will likely open later or with more restrictions and so receive grants of up to £18,000. These will be worth an extra £5 billion – taking our total cash grant support to £25 billion.
And this Government will extend the unprecedented 100% business rates holiday for all eligible businesses in the retail, hospitality and leisure sectors – a tax cut worth £10 billion.
This will apply for the next three months until June, before cutting rates by two-thirds for the remaining nine months, up to a maximum £2 million per business. That means the vast majority of businesses will receive a 75% cut in their bill next year – a tax cut worth £6 billion.
We are also providing further support for homebuyers, by extending the stamp duty cut. To avoid purchases not completing in time for the end of March, we are today announcing the £500,000 nil rate band will end on 30 June, before tapering down to £250,000 until the end of September.
But even with the stamp duty cut, there is still a significant barrier for people to get on the housing ladder: the cost of a deposit. That is why, from April, lenders who commit to providing loan-to-value ratios of between 91% to 95% can get a government guarantee on the full value of those mortgages. This new mortgage guarantee will help more prospective homebuyers take their first step on the housing ladder – doubling down on the Prime Minister’s promise to turn Generation Rent into Generation Buy.
The Conservative record on the economy means we came into this crisis in a strong position. By 2010, the deficit had risen from £13 billion to £153 billion.
But, thanks to sensible Conservative management of the economy, we reduced this by over 80% by 2019. Between 2010 and 2019, we grew the economy by 19% – faster than France, Italy and Japan. And during this period, we helped 3.4 million more people into work.
That has enabled us to respond with £407 billion of support over this year and next. That’s one of the largest fiscal support packages of any country globally. And our plan is working. The OBR now expects the UK economy to recover to its pre-crisis level six months earlier than originally thought – the second quarter of 2022, instead of the fourth. And unemployment is now expected to peak at 6.5% instead of nearly 12%, as feared last summer.
Despite this, our economy and public finances have been hit hard and we need a fair and honest plan about the action that we need to take. Without further action, borrowing would remain high and debt continue to rise indefinitely, even after we have recovered from the crisis and with strong growth.
This Budget puts in place measures to grow the economy into the future. But hoping for growth alone to rescue us won’t work – because our economy has been permanently scarred. And we can’t reduce spending if we want stronger public services.
We must balance support for the economy – but also be honest about the need to fix our public finances.
So in 2023, the rate of corporation tax paid on large company profits will increase to 25%. To help fix the problems the pandemic has created, we are asking only the largest, most successful and profitable companies to contribute more, from April 2023, on the rate of tax on their profits. In total, 90% of businesses will pay less than the 25%.
Even after this change the UK will still have the lowest rate in the G7 – lower than the US, Japan, Canada, France, Germany and Italy – and the fifth lowest in the G20. If we take these actions, the OBR forecast that in five years’ time, debt should be broadly stable or declining.
We also must do even more to encourage businesses to invest now and unlock their cash reserves.
Historically, the UK has invested a lot less than our peers, but investment drives innovation, productivity and growth. That is why, for the next two years, when businesses invest, they can reduce their tax bill by 130% of the cost of that investment. The OBR have said this will lift business investment by 9%, and lift us from 30th in the OECD’s world rankings for business investment to 1st. And for the two-year period this is in place, this will be the biggest business tax cut in modern British history – worth £25 billion.
The Income Tax Personal Allowance has doubled over the last decade to £12,500 under this Conservative Government, standing now as the highest basic personal tax allowance of any G20 country and meaning a typical basic rate taxpayer now pays £1,200 less tax than in 2010. Next year, it will rise in line with inflation to £12,570 – but we will keep it at this higher level until April 2026. Similarly, the Higher Rate will also increase next year to £50,270 until April 2026.
We are clear that this does remove the incremental benefit had thresholds continued to increase with inflation. However:
We will also maintain inheritance, CGT and the pensions lifetime allowances, and the VAT threshold at present levels. The inheritance tax-free thresholds will remain at existing levels until April 2026 (the Nil Rate band has been frozen since 2009). A surviving spouse or civil partner can pass on up to £1 million to their family without inheritance tax. The lifetime allowance will be maintained at just over £1 million until April 2026, but 95% of individuals approaching retirement will be unaffected by this change.
And for two years from April 2022, the VAT threshold will remain at £85,000, still more than twice as high as the EU and OECD averages.
Lastly, and importantly, we are standing by our manifesto pledge NOT to increase Income Tax, NICs or VAT and we are freezing alcohol and fuel duty. And to keep the cost of living down, all alcohol duties will be frozen, and fuel duty will be frozen for the eleventh year in a row, saving motorists £1,600 since 2010.
Today we are announcing 45 new Town Deals, locating Treasury North in Darlington, launching the £150 million Community Ownership Fund to help communities buy local assets such as pubs and theatres, and opening the first round of bids for the £4.8 billion Levelling Up Fund we announced at Spending Review last year to fund the infrastructure of everyday life.
And to encourage free trade and bring investment to all regions of the country through lower taxes and cheaper customs, we are today revealing the locations of the first eight freeports in England: Teesside, Humberside, Felixstowe, Thames Gateway, Solent, Plymouth, Liverpool and the East Midlands.
We are today also investing in offshore wind port infrastructure in Teesside and Humberside, announcing a new environmental retail savings product to build on our world-leading sovereign green bond, making the City a leader in carbon offset markets trading, and launching the first ever UK Infrastructure Bank – located in Leeds – to invest in public and private projects. Together, these policies will drive green growth and create green jobs.
Too often our brilliant small firms don’t have the time or resources to get the extra skills they need to be more productive. So we are launching a new Help to Grow scheme to boost the productivity of our small businesses. Our new Help to Grow: Management scheme will help SMEs get world-class management training through government-funded programmes delivered through business schools, with businesses contributing only £750, just 10% of the overall cost of the course.
Help to Grow: Digital will level up the digital skills of our small businesses with a voucher entitling them to 50% off the purchase of new productivity-enhancing software, up to a total of £5,000 each.
Help to Grow will launch this Autumn and could benefit 130,000 SMEs.
And we are making the UK the best place in the world for high growth, innovative companies. These businesses account for just 1% of companies, but generate 80% of our employment growth. We have launched a wide-ranging consultation to make the UK the best place in the world for innovating businesses, and make sure that the UK remains a competitive location for cutting-edge research.
Our future economy depends on remaining a United Kingdom. As a result of the policies announced in today’s Budget, Scotland will receive £1.2 billion, Wales £740 million, and Northern Ireland £410 million in Barnett consequentials. Taken together with additional funding from last year’s Spending Review, the devolved nations are receiving an extra £7.2 billion in 2021-22.
Furthermore, most of the policies today are UK-wide: extensions to furlough and self-employed schemes, Universal Credit extension, Recovery Loans, our reduced VAT cut, mortgage guarantee, Super Deduction capital investment, Community Ownership Fund, Levelling Up Fund, freeports, investment in green jobs, Help to Grow, visa reforms, Future Fund Breakthrough, and reforms to pension funds.
This Budget is also delivering bespoke projects in Scotland, Wales and Northern Ireland. We are funding the Aberdeen Energy Transition Zone, North Sea Transition Deal, and Global Underwater Hub in Scotland; the Global Centre for Rail Excellence and Holyhead Hydrogen Hub in Wales; accelerating six growth deals in Wales and Scotland, and exempting the Northern Ireland Housing Executive from corporation tax.