Rishi Sunak will extend the furlough scheme until the end of September and pledge to do “whatever it takes” to help people and businesses through the coronavirus crisis when he unveils his Budget.
The Chancellor is set to outline a three-point plan to support people through the coming months, rebuild the economy and fix the ravaged public finances in the wake of the pandemic.
In his statement to the House of Commons today, he will build on the £280bn package of support already given by the Treasury during the pandemic.
The Coronavirus Job Retention Scheme has protected more than 11 million jobs since its inception, but under plans to taper the UK Government’s contribution, employers will be expected to pay 10% towards the hours their staff do not work in July.
Their contribution will increase to 20% in August and September, as the economy reopens, but employees will continue to receive 80% of their salary for hours not worked until the scheme ends. It had been due to close at the end of April.
Further support for self-employed workers will also be announced, with more than 600,000 people – many of whom became self-employed in 2019/20 – now eligible for cash grants.
A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, worth 80% of three months’ average trading profits up to £7,500, while the Chancellor will set out details of a fifth grant.
The Treasury stated that hundreds of thousands more people will be eligible for the grants this time, as tax return data for 2019/20 is now available. Sunak faced criticism that newly self-employed people were unable to benefit from the scheme previously.
Yesterday, Sunak pledged £27m for an Aberdeen Energy Transition Zone, £5m for an underwater technology centre based in the city and up to £2m to support the continued development the North Sea Transition Deal.
Ahead of the Budget, he said: “Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK.
“There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”
The Chancellor is expected to tell MPs: “First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s Budget we begin the work of building our future economy.”
The extension to the furlough scheme was welcomed by business organisations, with Institute of Directors’ IoD chief economist Tej Parikh commenting: “Many firms have tapped into the Job Retention Scheme to support their cashflow while restrictions have eaten into their revenues, and without it jobs losses would be even higher.
“By extending support until end-September, the Chancellor has also given many businesses an extra cushion as they attempt to rescale and rehire when the economy reopens.”
Night Time Industries Association chief executive Michael Kill said: “This will go a long way to safeguarding sector jobs until we are able to re open, allowing a level of flexibility through the phases of market re engagement.”
The Office for Budget Responsibility (OBR) will publish its latest forecasts alongside the Budget – with Boris Johnson expecting a recovery to be “much stronger than many of the pessimists have been saying over the last six months or so”.
In its November forecasts, the OBR indicated the national debt could reach 105% of gross domestic product (GDP) in 2020/21, with a record peacetime borrowing of £394bn.
Sunak is also expected to outline plans to allocate:
- £5bn for a new grant scheme to help businesses.
- £1.65bn to boost the UK’s vaccine roll-out.
- £520m to support small UK businesses with training and software.
- £410m to support the badly-hit culture sector.
- £300m to help cricket, tennis and horse racing in a summer sports recovery package.
- £150m to help local communities save struggling pubs, sports clubs, theatres and Post Offices.
- £2.8m to help fund a joint UK and Ireland bid to host the 2030 football World Cup.
The Chancellor is reportedly planning to extend the stamp duty holiday until the end of June, while the business rates holiday for the retail, hospitality and leisure sectors may also be continued, along with the VAT cut for hospitality and tourism.
A freeze on fuel duty looks set to continue, but Sunak is said to be considering raising corporation tax to as much as 25% from 19%.
The Sunday Times said he could freeze the level at which people start paying the basic rate of income tax – £12,500 – and the £50,000 threshold at which they begin paying the higher 40p rate for at least three years.
An extension to the £20-per-week uplift to Universal Credit for six months has also been mooted, as have plans to freeze the lifetime allowance – the amount people can save in their pension pot before tax charges kick in – at just over £1m.
Our sister site Business Live will be live blogging the Budget announcement and all the reaction and analysis today.
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