By Hallum Cowell | Deputy Editor
UK Government Chancellor Rishi Sunak unveiled 2021’s budget in early March.
The new budget will have an impact on all those living within the UK and comes at a time when many are hoping that the COVID-19 pandemic is coming to an end.
The State of the Economy
The UK economy has been hit hard by COVID-19, shrinking by 10% in 2020, with the UK entering a recession late in the year.
Experts have predicted however that the economy is set to grow four percent in 2021 and return to its pre COVID-19 level by 2022. While this is certainly good news for the economists it does mean that the economy would have seen no growth in nearly three years which impacts a number of long-term projections and budgetary plans.
Over 700,000 people are estimated to have lost their jobs during the pandemic and unemployment is set to rise to 6.5% by 2022.
The UK has also stepped-up borrowing. The government debt is currently at £355bn and the government is aiming to bring that figure down to £234bn in 2022.
Just under a year after the UK’s first lockdown began, on 16 March 2020, the 2021 budget outlined a number of measures designed to continue to support people affected.
Furlough, the scheme wherein the government will pay 80% of employees’ wages while their working hours are affected by COVID-19 closures, will continue until September this year. The minimum wage is also set to increase to £8.91 an hour from April this year.
Those receiving welfare and income support will also see a number of measures extended, including the £20 a week increase to Universal Credit.
This means that those on the Government’s new welfare system will receive an extra £1,000 a year. More self-employed people are also being promised further support and those claiming Working Tax Credit will be eligible for a £500 one off payment.
As part of the budget Sunak has said that taxes will have to rise as the government continues to spend on COVID-19 measures and while the economy recovers.
Tax-free personal allowance and higher rate income tax will be frozen from April 2021 until 2026. Corporation tax is set to rise from 19%, one of the lowest rates in Europe, to 25% in 2023, bringing the UK in line with countries such as the Netherlands and Spain who currently also have 25% corporation tax.
Inheritance tax thresholds, pensions lifetime allowances and annual capital gains tax exemptions are also set to be frozen until at least 2025. The “Stamp Duty Holiday” is also set to be extended until June 30.
Hospitals and Schools
Health and Education are set to get funding for specific programs.
£1.65bn is being allocated for vaccine rollout while £50m is being assigned to improve vaccine testing.
£19m is being given to domestic violence programmes with the aim of funding respite rooms for homeless women.
An additional £40m is being assigned to the lifetime support guarantee for victims of the thalidomide scandal, while groups supporting veteran’s mental health needs arebeing given £10m.
Sports and the Arts
With the restrictions placed upon the sport and arts industries during the pandemic, many venues have been forced to close their doors permanently.
At the very least many of these places would have seen significant decreases in their revenue. In response to this the government have assigned £400m for art venues in England to help them reopen.
For sport, a £300m recovery package for professional sport has been announced along with £25m for grassroots football.
The Government has also assigned £1.2m to help begin the delayed Women’s Euro’s football tournament, which is to be held in England in 2022.
Transport, Housing and the Environment
The new budget outlines a number of new measures for transport and housing.
A UK infrastructure bank is to be established in Leeds with £12bn capital. The hope is that this bank can fund £40bn worth of public and private projects both for housing and transport. The government also outlined £15bn worth of “green bonds” which it argues will help finance the government’s planned move to net zero carbon emissions by 2050.
Businesses, science and digital
The 2021 budget has a myriad of new business policies.
£20bn worth of business investments and tax breaks are to be given to businesses, as well as firms being able to deduct investment costs from their tax bills.
Businesses are being incentivised to take on more apprentices and VAT is being lowered for the hospitality sector by five percent until September.
In a similar policy to the arts industry, £6,000 per premises is being given to re-opening non-essential businesses while gyms, personal care providers, the hospitality industry and leisure businesses are getting £18,000 per premises.
Regions and Devolved Governments
As part of the budget extra funding has been promised to the devolved nations and regions of the UK. These include an extra £740m for Wales, £1.2bn for Scotland and £410m for Northern Ireland.
Political Parties and Experts Respond
As with every budget many have been keen to critique the government’s decisions.
The Institute for Fiscal Studies (IFS), an economic think tank, said that the spending cuts within the budget “isn’t really levelling with people.”
Paul Johnson of the IFS said that “Santa Sunak” was starting to look more like “Scrooge Sunak” and that the tax increases included in the budget were in his opinion “screeching U-turns.”
Keir Starmer, Labour Party leader, made a speech in the House of Commons following the budget announcement saying that “I’m sure this budget will look better on Instagram. In fact, this week’s PR video cost the taxpayer so much, I was half expecting to see a line in the Office for Budget Responsibility forecast for it.”
He added that “After the decisions of the last year and the decade of neglect, we need a budget to fix the foundations of our economy, to reward our key workers, to protect the NHS.”
Critique was also levelled against the chancellor for his 1% pay increase for NHS workers. The Shadow Health Secretary Jonathon Ashworth said that “The head of the NHS has confirmed what we already knew: the Conservatives have broken their promise to the NHS and are cutting nurses’ pay”, after Sir Simon Stevens, head of NHS England, said they had budgeted for a 2.1% pay increase.
Some Conservative MPs have also been calling for a one-off bonus for NHS staff, similar to what has already been offered in Scotland and Northern Ireland. A Government Health Minister responded that “nurses are well-paid for the job.”twitter Follow @gairrhyddpol for all of the latest updates from the world of politics.