It was supposed to be the set-piece occasion that would set the tone for five years – at the very least – of Conservative majority government. Almost exactly three months on from a crushing general election victory, Sajid Javid would announce a headline-grabbing 2p cut in the basic rate of income tax and set the UK on the path to post-Brexit prosperity.
Instead, today’s Budget was overshadowed by the spread of COVID-19 and a warning from Rishi Sunak – the new Chancellor of the Exchequer, and the first to be born in the 1980s – that we can expect a significant if temporary adverse impact on the UK economy. “For a period”, he said, “it will be tough”.
His hour-long statement inevitably focused on a raft measures to support small businesses and others in combating the impact of coronavirus – not least a £30 billion fiscal stimulus for the real economy and health services. But that was only the beginning of a Budget high on spending commitments, with the Chancellor promising to invest more than £600 billion in critical infrastructure including roads, railways, affordable housing, broadband and R&D over the five-year Parliament.
The speech was lighter than expected on green measures, although an £800 million investment in carbon capture and storage has been widely welcomed. A Digital Services Tax of 2p will come into force from 1 April, despite protestations from the United States. Elsewhere, fuel and alcohol duty were frozen while the hated ‘tampon tax’ of 5% on sanitary products will be scrapped following our departure from the EU.
• Defence
• Digital, culture, media and sport
• Education and skills
• Employment
• Energy and climate change
• Environment, food and rural affairs
• Financial services
• Foreign affairs and international development
• Health and social care
• Housing
• Research and development
• Retail
• Transport and Infrastructure
• Travel retail
Defence
• £55bn worth of expenditure in 2020/21.
• A commitment to invest an additional £100 million in defence R&D.
• £10m to support veterans with mental health needs through the Armed Forces Covenant Fund Trust.
Digital, culture, media and sport
• The implementation of a Digital Services Tax of 2% of major online companies, to take effect from 1 April 2020, raising £500 million per year.
• £5bn to support broadband rollout to rural areas of Britain by 2025.
• £1bn to help mobile phone operators tackle 4G blackspots across the UK.
• Business rates for pubs will be capped at £5,000.
• All alcohol duty frozen
• £510 million new investment into shared rural telephone network, which will be matched by industry. By 2025, 4G coverage will reach 95% of UK’s landmass.
• Tax abolished on reading materials including books and magazines.
• Invest over £900 million to ensure UK businesses are leading the way in high-potential technologies.
Education and skills
• Schools with three-year settlement increase of £7.1bn by 2022
• Per pupil funding up 4%. Starting salaries for teachers to be £30,000 by September 2022.
• £1.5bn for further education colleges over five years.
Employment
• National Living Wage to be two-thirds of the median wage by 2024. Expected to be £10.50 an hour.
• Increase in National Insurance threshold to £9,500 from April 2020, saving the typical employee around £100 per year.
• Employment Allowance to be increased to £4,000, benefiting over half a million businesses.
• Entrepreneurs’ Relief limited to lifetime gains of up to £1 million, down from £10 million.
Energy and climate change
• Doubling the Energy Innovation Programme to help meet our net-zero ambitions and develop new decarbonisation technologies.
• £800 million CCS Infrastructure Fund to establish CCS in at least two sites by 2030.
• Introduce a Green Gas Levy to fund a new support scheme for biomethane.
• Confirmation of funding of the Heath Network Invest Project to extend to 2022 and provide £270 million of new funding to enable new and existing heat networks.
• Raising the Climate Change Levy on gas in 2022-2023 and 2023-2024.
• Reopening and extending the Climate Change Agreement scheme by two years.
• Freeze the Carbon Price Support rate.
Environment, food and rural affairs
• Nature for Climate Fund which will invest £640 million in tree planting and peatland restoration in England, increasing the rate of tree planting by over 600%.
• Invest £5.2 billion in a six-year capital investment programme for flood defences.
• A new £200 million package of place-based resilience schemes to ensure faster recovery for rural, urban and coastal communities most at risk of flooding.
• Provide an emergency £120 million to repair flood defences which were damaged in the floods in winter 2019-20.
• Promote air quality improvement by removing the entitlement to use red diesel except for agriculture, fish farming, rail and non-commercial heating.
• The ‘25 Year Environment Plan’ sets out the government’s ambitions for clean air and water, thriving plants and wildlife, and mitigating and adapting to climate change.
Financial services
• Introduction of a SME term funding scheme – who will help reinforce transmission in the reduction of bank rate to real economy.
• Government response is to use fiscal response to support spending and services – chancellor announced £12bn plan to support public services, individuals and businesses, whose finances are affected by COVID-19:
o Businesses with fewer than 250 employees will have sick pay for employees off work due to coronavirus up to 14days to repaid by government in full – the equivalent of £2bn for 2m business
o Coronavirus business interruption loan scheme introduced – banks are positioned to provide loans of up to £1.2m to SMEs which the government will guarantee to support bank lending confidence, covering up to 80% of losses with no fees. These measures will unlock up to £1bn of attractive working capital market loans to support SMEs
• £130 million in new funding to extend accessibility to start-up loans, along with £200 million in funding for the UK Business Bank to invest in scale-ups
• Reforming Regulation Initiative to collect ideas for regulatory reform to ensure the UK remains a dynamic and competitive regulatory environment. Recommendations of the Furman Review of digital competition will also be implemented, with further detail on the Financial Services Bill also being published, which will ensure that the UK maintains its world-leading regulatory standards and openness to international markets.
Foreign affairs and international development
• The Department for International Trade will become an endorsing body to allow it to directly support visa applications for eligible foreign investors seeking to start a business in the UK.
• The government is tripling funding for the Darwin Plus programme to help protect and
• Further support for exporters by extending and increasing the lending capacity of UK Export Finance (UKEF).
• Drive investment into and end-to-end support for exporters from the Northern Powerhouse, the Midlands Engine and the Western Gateway through dedicated local champions based at key overseas posts.
• Throughout Coronavirus crisis, whatever extra resources the NHS needs, it will get. Government stands behind the NHS.
• £5 billion emergency response fund to support NHS and public services.
• Additional NHS funding over and above the £20 billion promised in 2018.
• Mental health support for veterans – £10 million donation to Armed Forces Covenant Trust.
• Change pensions tax rules to ensure that NHS staff across the UK, including senior doctors, whose income is less than £200,000 can work additional hours for the NHS without their annual allowance being reduced.
Housing
• £12.2 billion for the Affordable Homes Programme.
• £400 for Mayoral Combined Authorities and local areas to build houses on brownfield sites.
• Cut interest rates for investment in social housing by 1%.
• Commitment to exploring long-term reforms of the planning system.
Research and development
• Increase Government investment by £22 billion by 2024-2025 – highest level in 40 years and higher than USA, China, France and Japan.
• £400 for immediate funding in research, innovation and equipment in 2020-2021.
• £200 million investment programme in life sciences innovation through the British Business Bank.
• £300 million in experimental mathematical research over the next five years.
• £800 million in ‘blue-skies funding’, modelled on the United States’ ARPA.
Retail
• In response to the Coronavirus, businesses with a rateable value of less than £150,000 will not pay business rates this financial year – these measures are also extended to business across retail, hospitality, leisure sectors. The equates to £25,000 savings for each business and an overall tax cut worth over £1bn. As a result, half of UK won’t pay business rates this financial year, with a long-term review into the future of business rates to be reviewed at the Autumn budget
• The UK’s smallest business currently eligible for small business relief will receive £3000 cash grant per business. This is a £2bn cash injection to 700,000 of the UK’s smallest
businesses
• Business rate discounts for pubs to rise from £1,000 to £5,000 this year.
• The 5% ‘tampon tax’ on all sanitary products will be scrapped as of 2021.
Transport and Infrastructure
• £403 million for the Plug-in Car Grant, extending it to 2022-2023.
• £129.5 million to extend the Plug-in Grants for vans, taxis and motorcycles to 2022-23.
• £500 million over the next five years to support the rollout of a fast-charging EV network.
• The Office of Low Emissions Vehicles will complete a comprehensive electric vehicle charging infrastructure review.
• Removing the red diesel entitlement from April 2022.
• Allocating Local Authorities with an additional £304 million to reduce nitrogen dioxide emissions.
Travel retail
• Duty- and tax-free consultation announced