Budget Speech 2021
3 Mar 2021 03:29 PM
The Budget 2021 speech as delivered by Chancellor Rishi Sunak
Madam Deputy Speaker,
A year ago, in my first Budget, I announced our initial response to coronavirus.
What was originally thought to be a temporary disruption to our way of life has fundamentally altered it.
People are still being told to stay in their homes; businesses have been ordered to close; thousands of people are in hospital.
Much has changed.
But one thing has stayed the same.
I said I would do whatever it takes; I have done; and I will do so.
We have announced over £280 billion of support, protecting jobs, keeping businesses afloat, helping families get by.
Despite this unprecedented response, the damage coronavirus has done to our economy has been acute. Since March, over 700,000 people have lost their jobs.
Our economy has shrunk by 10% - the largest fall in over 300 years.
Our borrowing is the highest it has been outside of wartime.
It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation.
But we will recover.
This Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.
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.
Madam Deputy Speaker,
Today’s forecasts show that our response to coronavirus is working.
The Prime Minister last week set out our cautious but irreversible roadmap to ease restrictions whilst protecting the British people.
The NHS, deserving of immense praise, has had extraordinary success in vaccinating more than 20 million people across the United Kingdom.
And combined with our economic response, one of the most comprehensive and generous in the world, this means the Office for Budget Responsibility are now forecasting, in their words:
“A swifter and more sustained recovery” than they expected in November.
The OBR now expect the economy to return to its pre-covid level by the middle of next year - six months earlier than previously thought.
That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher.
But while our prospects are now stronger, coronavirus has done and is still doing profound damage.
And today’s forecasts make clear repairing the long-term damage will take time.
The OBR still expect that in five years’ time, because of coronavirus, our economy will be 3% smaller than it would have been.
Before I share the detail of the OBR’s forecasts, let me thank Richard Hughes and his team for their work.
The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.
And the OBR have said that our interventions to support jobs have worked.
In July last year, they expected unemployment to peak at 11.9%. Today, because of our interventions, they forecast a much lower peak: 6.5%.
That means 1.8 million fewer people are expected to be out of work than previously thought.
But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority.
So, Madam Deputy Speaker,
Let me turn straight away to the first part of this Budget’s plan: to protect the jobs and livelihoods of the British people through the remaining phase of this crisis.
First, the furlough scheme will be extended until the end of September.
For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked, until the scheme ends.
As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees.
Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September.
The Government is proud of the furlough – one of the most generous schemes in the world, effectively protecting millions of people’s jobs and incomes.
Second, support for the self-employed will also continue until September with a fourth grant covering the period February to April, and a fifth and final grant from May onwards.
The fourth grant will provide three months of support at 80% of average trading profits.
For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.
But as the economy reopens over the summer, it is fair to target our support towards those most affected by the pandemic.
So people whose turnover has fallen by 30% or more will continue to receive the full 80% grant.
People whose turnover has fallen by less than 30% will therefore have less need of taxpayer support and will receive a 30% grant.
And I can also announce a major improvement in access to the self-employed scheme.
When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed the 2019-20 tax return.
But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom became self-employed last year can now claim the fourth and fifth grants.
Over the course of this crisis, we will have spent £33 billion supporting the self-employed; one of the most generous programmes for self-employed people anywhere in the world.
Third, we’re also extending our support for the lowest paid and most vulnerable.
To support low-income households, the Universal Credit uplift of £20 a week will continue for a further six months, well beyond the end of this national lockdown.
We’ll provide Working Tax Credit claimants with equivalent support for the next six months.
And Because of the way that system works operationally, we will need to do so with a one-off payment of £500.
And over the course of this year, as the economy begins to recover, we are shifting our resources and focus towards getting people into decent, well-paid jobs.
We reaffirm our commitment to end low pay, increasing the National Living Wage to £8.91 from April – an annual pay rise of almost £350 for someone working full time on the National Living Wage.
And My Right Honourable Friends the Education Secretary and the Work and Pensions Secretary, are taking action to give people the skills they need to get jobs or get better jobs:
The Restart programme – supporting over a million long term unemployed people.
The number of work coaches – doubled.
The Kickstart scheme – funding high quality jobs for over a quarter of a million young people.
The Prime Minister’s Lifetime Skills Guarantee – giving every adult the opportunity for a fully-funded Level 3 qualification.
And we want businesses to hire new apprentices so we’re paying them more to do it.
Today, I am doubling the incentive payments we give businesses to £3,000 – that’s for all new apprentice hires, of any age.
Alongside investing £126 million of new money to triple the number of traineeships we’re taking what works to get people into jobs and making it better.
Madam Deputy Speaker,
One of the hidden tragedies of lockdown has been the increase in domestic abuse.
So I’m announcing today an extra £19 million – on top of the £125 million we announced at the Spending Review – for domestic violence programmes to reduce the risk of reoffending, and to pilot a network of ‘Respite Rooms’ to provide specialist support for vulnerable homeless women.
To recognise the sacrifices made by so many women and men in the Armed Forces community, I’m providing an additional £10 million to support veterans with mental health needs.
And, on current plans, the funding to support survivors of the Thalidomide scandal runs out in 2023.
They deserve better than to have constant uncertainty about the future costs of their care.
So not only will I extend this funding with an initial down payment of around £40 million; I am today announcing a lifetime commitment, guaranteeing funding forever.
And let me thank the Thalidomide Trust and the Honourable Member for North Dorset for their leadership on this important issue.
As well as supporting people’s jobs, incomes, the lowest paid and most vulnerable, this Budget also protects businesses.
We’ve been providing businesses with direct cash grants through the recent restrictions. These grants come to an end in March.
I can announce today that we will provide a new Restart Grant in April, to help businesses reopen and get going again.
Non-essential retail businesses will open first, so they’ll receive grants of up to £6,000 per premises.
Hospitality and leisure businesses, including personal care and gyms, will open later, or be more impacted by restrictions when they do, so we’ll give them grants of up to £18,000.
That’s £5 billion of new grants; on top of the £20 billion we’ve already provided; taking our direct total cash support to business to £25 billion.
And I pay tribute to My Right Honourable Friend the Member for Romsey and Southampton North for highlighting the particular needs of the personal care sector.
And, with My Right Honourable Friend the Culture Secretary, we’re making available £700 million to support our incredible arts, culture and sporting institutions as they reopen;
Backing the United Kingdom and Ireland’s joint 2030 World Cup bid, launching a new approach to apprenticeships in the creative industries, and extending our £500 million film and TV production restart scheme.
Even with the new Restart Grants, some businesses will also need loans to see them through.
As the Bounce Back Loan and CBIL programmes come to an end, we’re introducing a new Recovery Loan Scheme to take their place.
Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year. And the government will provide a guarantee to lenders of 80%.
Last year, we provided an unprecedented 100% business rates holiday, in England, for all eligible businesses in the retail, hospitality and leisure sectors – a tax cut worth £10 billion.
This year, we’ll continue with the 100% business rates holiday for the first three months of the year, in other words, through to the end of June.
For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.
A £6 billion tax cut for business.
One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4 million people need our support.
To protect those jobs, I can confirm that the 5% reduced rate of VAT will be extended for six months to 30th September.
And even then, we won’t go straight back to the 20% rate.
We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until April of next year.
In total, we’re cutting VAT next year by almost £5 billion.
Madam Deputy Speaker,
The housing sector supports over half a million jobs.
The cut in stamp duty I announced last summer has helped hundreds of thousands of people buy a home and supported the economy at a critical time.
But due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for the end of March.
So I can announce today the £500,000 nil rate band will not end on the 31st of March, it will end on the 30th of June.
Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1st.
Even with the stamp duty cut, there is still a significant barrier to people getting on the housing ladder – the cost of a deposit.
So I’m announcing today a new policy to stand behind homebuyers: a mortgage guarantee.
Lenders who provide mortgages to home buyers who can only afford a five percent deposit, will benefit from a government guarantee on those mortgages.
And I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after.
A policy that gives people who can’t afford a big deposit the chance to buy their own home.
As the Prime Minister has said, we want to turn Generation Rent into Generation Buy.
So, Madam Deputy Speaker,
The furlough – extended to September.
Self-employed grants – extended to September.
Universal Credit uplift – extended to September.
More money to tackle domestic violence.
Bigger incentives to hire apprentices.
Higher grants to struggling businesses.
Extra funds for culture, arts and sport.
New loan schemes to finance businesses.
Kickstart, Restart, a Lifetime Skills Guarantee.
Business rates – cut.
VAT – cut.
Stamp duty – cut.
And a new mortgage guarantee.
The first part of a Budget that protects the jobs and livelihoods of the British people.
And, Madam Deputy Speaker,
As you can see, we’re going long, extending our support well beyond the end of the Roadmap…
…to accommodate even the most cautious view about the time it might take to exit the restrictions.
Let me summarise for the House the scale of our total fiscal response to coronavirus.
At this Budget we are announcing an additional £65 billion of measures over this year and next to support the economy in response to coronavirus.
Taking into account the significant support announced at the Spending Review 20, this means our total COVID support package, this year and next, is £352 billion.
Once you include the measures announced at Spring Budget last year, including the step change in capital investment, total fiscal support from this Government over this year and next amounts to £407 billion.
Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever faced.
And, by any objective analysis, this Government has delivered one of the largest, most comprehensive and sustained responses this country has ever seen.
So, Madam Deputy Speaker,
We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.
But the damage done by coronavirus, combined with a level of support unimaginable only twelve months ago, has created huge challenges for our public finances.
The OBR’s fiscal forecasts show that this year, we have borrowed a record amount: £355 billion.
That’s 17% of our national income, the highest level of borrowing since World War Two.
Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be £234 billion, 10.3% of GDP – an amount so large it has only one rival in recent history; this year.
Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely.
Instead, because of the steps I am taking today, borrowing falls to 4.5% of GDP in 22-23, 3.5% in 23-24, then 2.9% and 2.8% in the following two years.
And while underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023-24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.
Let me explain why this matters.
The amount we’ve borrowed is comparable only with the amount we borrowed during the two world wars.
It is going to be the work of many governments, over many decades, to pay it back.
Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked.
When crises come, we need to be able to act.
And we need the fiscal freedom to act.
A freedom that you only have if you start with public finances in a good and strong place.
[POLITICAL CONTENT REMOVED]
When the next crisis comes, we need to be able to act again.
And while our borrowing costs are affordable right now, interest rates and inflation may not stay low for ever; and just a 1% increase in both would cost us over £25 billion.
And as we have seen in the markets over the last few weeks, sovereign bond yields can rise sharply.
This Budget is not the time to set detailed fiscal rules, with precise targets and dates to achieve them by – I don’t believe that would be sensible.
But I do want to be honest about what I mean by sustainable public finances, and how I plan to achieve them. Our fiscal decisions are guided by three principles.
First, while it is right to help people and businesses through an acute crisis like this one, in normal times the state should not be borrowing to pay for everyday public spending.
Second, over the medium term, we cannot allow our debt to keep rising, and, given how high our debt now is, we need to pay close attention to its affordability.
And third, it is sensible to take advantage of lower interest rates to invest in capital projects that can drive our future growth.
So the question is how we achieve that; how we balance the extraordinary support we are providing to the economy right now, with the need to begin the work of fixing our public finances.
I have and always will be honest with the country about the challenges we face.
So I’m announcing today two measures to begin that work.
Let me take each in turn.
Madam Deputy Speaker,
Our response to coronavirus has been fair, with the poorest households benefiting the most from our interventions.
And our approach to fixing the public finances will be fair too, asking more of those people and businesses who can afford to contribute and protecting those who cannot.
So this government is not going to raise the rates of income tax, national insurance, or VAT.
Instead, our first step is to freeze personal tax thresholds.
We’ve nearly doubled the income tax personal allowance over the last decade, making it the most generous of any G20 country.
We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.
The Higher Rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.
Nobody’s take home pay will be less than it is now, as a result of this policy.
But I want to be clear with all Members that this policy does remove the incremental benefit created had thresholds continued to increase with inflation.
We are not hiding it, I am here, explaining it to the House and it is in the Budget document in black and white. It is a tax policy that is progressive and fair.
And, I will also maintain, at their current levels, until April 2026:
The inheritance tax thresholds.
The pensions lifetime allowance.
The annual exempt amount in capital gains tax.
And, for two years from April 2022, the VAT registration threshold which, at £85,000, will remain more than twice as generous as the EU and OECD averages.
We’ll also tackle fraud in our covid schemes, with £100m to set up a new HMRC taskforce of around 1,000 investigators as well as new measures, and new investment in HMRC, to clamp down on tax avoidance and evasion.
The full details are set out in the Red Book.
Madam Deputy Speaker,
The government is providing businesses with over £100 billion of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery.
So the second step I am taking today is that in 2023, the rate of corporation tax, paid on company profits, will increase to 25%.
Even after this change the United Kingdom will still have the lowest corporation tax rate in the G7 – lower than the United States, Canada, Italy, Japan, Germany and France.
We’re also introducing some crucial protections.
First, this new higher rate won’t take effect until April 2023, well after the point when the OBR expect the economy to have recovered.
And even then, because corporation tax is only charged on company profits, any struggling businesses will, by definition, be unaffected.
Second, I’m protecting small businesses with profits of £50,000 or less, by creating a Small Profits Rate, maintained at the current rate of 19%.
This means around 70% of companies – 1.4 million businesses - will be completely unaffected.
And third, we will introduce a taper above £50,000, so that only businesses with profits of a quarter of a million or greater will be taxed at the full 25% rate.
That means only 10% of all companies will pay the full higher rate.