The Chancellor discussed the Office for Budget Responsibility’s forecast, stating that the UK’s economy will return to pre-pandemic levels by mid-2022, six months earlier than anticipated in their November report. However, the economy is still expected to be 3% smaller than it would have otherwise been in five years’ time, with growth of 4% forecast for 2021.

It is thought employment will now peak at 6.5%, well below the previously forecast 11.9%. Borrowing will hit a record £355bn in for the current financial year, before falling to £234bn next year.

COVID-19 Support Measures

The Chancellor announced that the furlough scheme will be extended to the end of September, paying 80% of workers’ wages when they are unable to work, returning to the earlier rachet down of taxpayer subsidy, with employers making contributions of 10% in July, and 20% thereafter. Support for self-employed people will also be extended to September, with 600,000 additional people gaining access to the funds. Those people taking Universal Credit payments will continue to receive an extra £20 for an additional six months.

To support businesses, £5bn in new grants will be provided as the economy reopens. Non-essential retailers will receive up to £6,000, whilst the severely impacted hospitality and leisure businesses can get up to £18,000. A fresh “Recovery Loan Scheme”, 80% backed by the Treasury, was also announced which will provide loans between £25,000 and £10m. The business rates holiday will now continue to the end of June and subsequently be reduced by two-thirds for the rest of the financial year. For the sectors worst impacted by the pandemic, the 5% reduced rate of VAT will continue to the end of September, rising to 12.5% for the following six months, and only returning to the normal 20% rate in April 2022. The Chancellor stated that this represents a £5bn cut in VAT. A “super deduction” capital allowance will be available for companies that invest in plant and machinery over the next two years, with firms able to cut their tax bill by 130% of the cost in what the Chancellor heralded as “the biggest tax cut in modern British history.”

Taxation

The Chancellor announced that there will be no increase in the rates of Income Tax, VAT, or National Insurance, sticking to the Conservatives 2019 manifesto pledge. Instead, the personal income tax allowance will be frozen at £12,570 from next year through to 2026, with the higher rate frozen at £50,270. From 2023, corporation tax will rise from 19% to 25% in 2023, but the Chancellor will reintroduce a small profits rate, and a new taper, meaning only businesses with profits above £250,000 will pay the full rate.

Other Key Announcements

• A new set of “Help to Grow” initiatives to be rolled out, focusing management and digital skills. The management scheme will help businesses receive training through dozens of new business schools which will offer new executive development programmes, with the government covering 90% of the cost. Meanwhile, the digital scheme will offer free expert training in digital skills and a 50% discount up to £5,000 on the cost of productivity enhancing software.

• Highly skilled workers such as data-scientists will be able to apply for a points-based visa which will not require third-party endorsement or a sponsor.

• Grants available for hiring apprentices of any age will increase from £2,000 to £3,000

• A further £1.6bn will be allocated to the rollout of COVID-19 vaccines in the UK alongside consultations to ensure the competitiveness of the UK’s incentives for research and development, and enterprise management.

• The arts and culture sector will receive £400m to assist the reopening of venues such as museums and galleries.

• A new UK Infrastructure Bank, located in Leeds, will seek to aid the “green industrial revolution” with public and private sector investment. The bank is expected to support a minimum of £40bn of investment with an initial capitalisation of £12bn.

• Darlington will be the home of a new treasury campus, and a £150m fund will be made available for community groups to take control of pubs, theatres and sports clubs that are at risk of closure.

o The Barnett Formula consequentials will provide £1.2bn additional budget funding for Scotland, £740m for Wales, and £410m in Northern Ireland.

• A Towns Fund will aim to regenerate 45 English towns with £1bn of investment, whilst the first round of submissions for the Levelling-Up fund have now been opened.

• A new retail savings product was announced, with £15bn of green bonds in total to boost green investment.

• A new group led by a former London Stock Exchange CEO to help the City become a world leader in voluntary carbon markets. This will be underpinned by an updated remit for the Bank of England that, whilst retaining the 2% target for inflation, will also take into account the UK’s sustainability and net zero targets.

• For the second year in succession, all planned rises on alcohol duty will be postponed, whilst fuel duty will also be frozen for the eleventh year in a row.

• An additional £19m will be provided for domestic abuse programmes due to its rising prevalence during the pandemic.