Rishi Sunak has outlined tax rises on companies and workers to pay for an additional £65bn of financial support to see Britain through the coronavirus pandemic, taking total government spending on the Covid crisis to more than £400bn.
The chancellor said at the budget he would extend furlough until September, and allocated billions of pounds in business grants and tax cuts to help employers while lockdown restrictions remain and the economy takes time to recover from the worst recession in 300 years.
Giving his budget speech in the Commons, Sunak said he would continue to do “whatever it takes” while it took time for growth to bounce back later this year after restrictions have been lifted. “It’s going to take this country, and the whole world, a long time to recover from this extraordinary situation.”
However, he said the rate of corporation tax would need to go up to 25% for the most profitable companies in Britain from April 2023, in a major reversal of Tory economic policy of recent decades, to pay for the damage to the exchequer inflicted by Covid.
Although committing not to raise income tax, national insurance and VAT, he set out a plan to freeze the thresholds at which people start paying tax on their wages until 2026, in a stealth raid to raise billions of pounds for the Treasury.
Making his 15th crisis-related announcement in a year when the pandemic crashed Britain’s economy into the deepest recession for more than 300 years, the chancellor said his priority was to see the economy emerge from the third lockdown without triggering mass unemployment and a wave of business failures.
Official figures announced by the chancellor forecast the British economy to grow by 4% this year, recovering from an almost 10% drop in 2020, with rapid progress on the vaccination programme enabling the economy to return to its pre-pandemic level by the middle of next year – six months earlier than feared.
Sunak said the budget deficit – the gap between spending and receipts – would, however, soar to £355bn this year, or 17% of GDP – the highest level in peacetime – in a reflection of the government response to Covid-19. But because of his actions to raise taxes, the deficit is expected to shrink to less than 3% of GDP by the time of the next election in the middle of the 2020s.
More to follow…