RISHI Sunak did all he could yesterday to lift spirits and see the UK through Covid — freezing booze and fuel duty, and extending furlough.
But the Chancellor’s bittersweet Budget also set out a £66billion tax raid to start paying for the pandemic — pushing the taxation burden to levels not seen since the 1960s.
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Teeing up a comeback summer, he froze booze and fuel duties, extended furlough, the stamp duty and VAT holidays for pubs and restaurants and the business rates pause.
But millions more will have an income tax hangover next year and big business will see their corporation tax bill soar from 19 to 25 per cent in 2023.
Mr Sunak said last night he was going long on support, with the hefty tab only kicking in after the economy has been given time to recover from the pandemic.
The Chancellor said, thanks to the vaccine, Britain would bounce back “swifter and faster”.
There were at least five years of pain ahead but he declared: “Our recovery starts today.”
'PROFOUND DAMAGE'
High street shops, hair salons and pubs will be able to apply for new lifelines and VAT on hospitality will remain at five per cent until June, rising to 12.5 per cent for the rest of the year rather than 20 per cent.
The economy is expected to return to pre-Covid levels by the middle of next year, six months earlier than previously thought.
The bittersweet Budget
CHANCELLOR Rishi Sunak had a tough job on his hands with yesterday’s Budget.
He needed to make efforts to start repairing the damage done by the pandemic — but at the same time he needed to make sure Brits would not be too badly hit in the short-term given that the crisis is still ongoing.
The Sun has examined Mr Sunak’s policies to see how they affect you. So have they left your glass half full — or will you be turning it upside down to tip out the last dregs?
INCOME TAX: Income tax rates are not going up but band levels are being frozen. That means over two million people will either see their tax bill go up or start paying it for the first time. This “stealth tax” will raise £20billion over five years.
CORPORATION TAX: Big business will have to foot the bill for the pandemic with a hike in their corporation tax to 25 per cent from 2023. It is set to raise billions to bolster the economy by 2026. But the rate will still be lower than other G7 nations.
SELF EMPLOYED: An estimated 600,000 people are eligible to apply for two more batches of pandemic cash. Anyone who filled in a tax return before the Budget will be eligible for up to £7,500 for every financial quarter, at a total cost of £12billion.
BOOZE AND PUBS: Booze duty was frozen for the second year running, while the VAT cut for hospitality venues will stay at five per cent until September.
Pubs, restaurants and shops will also be handed grants worth up to £18,000 to reopen.
FURLOUGH: The scheme will continue until September. The Government will pay wages up to £2,500-a-month until the end of June. Firms will then be expected to contribute an extra 10% in July, rising to 20% in August and September.
NHS: There was nothing for our NHS heroes. The Chancellor mentioned the Health Service only once and did not refer to social care.
HOUSING: A new mortgage scheme will help people with small deposits. The Stamp Duty holiday was further extended. Nothing for builders.
HIGH STREET: The Chancellor will allocate £1billion to regenerate 45 town centres in England to help them recover from Covid’s impact.
MINIMUM WAGE: The minimum wage will still be increased to £8.91 from April. It will mean a pay rise for more than two million workers.
PENSIONS: Pensions lifetime, inheritance tax and capital gains tax allowances frozen. It will hit pensioners, investors and the grieving.
BUSINESS: Firms will be able to claim back 130 per cent of investments in machinery, tools and IT equipment from their tax bill.
VACCINE: Another £1.6billion will deliver more jabs to Brits. It will fund more than 100 mass vaccine centres and pay 80,000 workers.
WORLD CUP: Rishi Sunak guaranteed £2.8million to bring football home and help Britain and Ireland’s joint bid for the 2030 World Cup.
GREEN: The first sovereign green bond could raise £15billion to beat climate change. Critics say not enough was done to help save the planet.
LEVELLING UP: Eight free ports will be allocated in England, with many in Red Wall seats. Treasury offices will move to Darlington in Co Durham.
UNIVERSAL CREDIT: The £20 uplift will stay in place for another six months. It is worth £1,000 a year to those on Universal Credit.
FUEL DUTY: Fuel duty has been frozen again for a record 11th year. It came after The Sun led a decade-long Keep It Down campaign.
But Mr Sunak warned the virus “has done and is still doing profound damage” and it was time to start addressing the state of the nation’s finances.
Government borrowing is expected to be more than £355billion this year, representing 17 per cent of UK income and the highest level since World War Two.
Mr Sunak told MPs: “Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be £234billion, 10.3 per cent of GDP — an amount so large it has only one rival in recent history: this year.”
He added: “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 per cent of GDP in 22/23, 3.5 per cent in 23/24, then 2.9 per cent and 2.8 per cent in the following two years.”
A million more people will pay income tax from next April, and a million more will be nudged into the higher rate, generating £19billion extra for the public purse by 2026.
Despite the Tory manifesto promising no rise in income tax, the thresholds at which people pay will be frozen from next year.
Fuel
FUEL duty is frozen for the 11th year running in a victory for The Sun’s Keep It Down campaign.
The rate was pegged at 57.95p per litre after the Chancellor abandoned plans to raise it.
There were fears an increase would punish drivers who are helping the country bounce back.
Rishi Sunak said: “Right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel.”
It comes after a decade of campaigning by Fair Fuel UK and Tory MPs led by backbencher Robert Halfon.
Mr Halfon said: “A big thank you to the Sun’s Keep it Down campaign and Fair Fuel UK.”
Brit drivers already pay the most at the pumps in Europe.
Booze
A VAT cut on food and drink has been extended, in a £485million boost for pubs and restaurants.
The rate will stay at five per cent until September before jumping to 12.5 per cent and returning to 20 per cent in April 2022.
Beer duty has also been pegged, while pubs, restaurants and shops will get grants worth up to £18,000 to reopen.
Ex-model Jodie Kidd, owner of The Half Moon pub in Kirdford, West Sussex, said: “A freeze in beer duty is a welcome relief.”
But some publicans warned it did little to help food-free pubs.
Campaign for Pubs vice chair Dawn Hopkins said: “It seems Rishi Sunak either doesn’t understand, or doesn’t care about, the classic community local pub.”
But Mr Sunak insisted those that earn more will pay more and no one’s current take-home pay will go down.
Confronted over the size of the tax burden at a Downing Street press conference last night, Mr Sunak said he could not be compared to other Chancellors.
He said: “We haven’t had a pandemic like this in over 100 years, so remember that is why we are having this conversation.”
The point at which people begin paying income tax will increase by £70 to £12,570 in April but will be maintained at that level until April 2026, meaning more will be dragged into paying tax as wages increase.
Last night, the Office for Budget Responsibility said the decision would bring 1.3million into the tax system.
We haven’t had a pandemic like this in over 100 years, so remember that is why we are having this conversation.
The 40p higher rate threshold will rise to £50,270 and then be frozen.
And the watchdog said that would raise £8billion per year by 2025/26 if incomes rose with inflation.
Meanwhile, corporation tax will increase from 19 per cent to 25 per cent in 2023.
But a new small profits rate will maintain the lower rate for those with profits of £50,000 and after that the rate will be tapered up to protect small and struggling businesses.
The OBR said these two measures, plus taking about £4billion a year more off annual departmental spending plans, would raise a total of £31.8billion in 2025/26.
But they warned it will increase the tax burden from 34 per cent to 35 per cent of GDP, saying: “It will be its highest level since Roy Jenkins was Chancellor in the late 1960s.”
Businesses last night welcomed the Budget but warned it could worry future investors.
The Confederation of British Industry said: “The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending.
"Thousands of firms will be relieved to receive support to finish the job and get through the coming months.
“But moving corporation tax to 25 per cent in one leap will cause a sharp intake of breath for many businesses and sends a worrying signal to those planning to invest in the UK.”
The Institute of Directors commented: “The extension to the furlough scheme will provide a vital cushion to support jobs as restrictions unwind and firms begin the costly process of rescaling.”
The British Chambers of Commerce said Mr Sunak had “listened and acted on our calls for immediate support”.
And the Federation of Small Businesses declared: “This Budget will help many small firms with their final push through to September but there is little here to aid job creation or help people return to work.”
The Sun says
RISHI Sunak has bet the farm on fuelling a historic two-year boom to bail out our broken economy.
Provided inflation stays low, it’s the right course. Even the Office for Budget Responsibility, not famous for its exuberant optimism, reckons we are poised to roar back — with FAR lower unemployment than first feared too.
The Chancellor’s Budget contained a blizzard of welcome tax breaks designed to transform post-Brexit, post-Covid Britain into a super-strength magnet for investment and jobs.
And despite the almost unimaginable hole the pandemic has blown in the public finances, there were still nuggets for Sun readers to cheer.
Mr Sunak froze duty on booze and, once again, on fuel –— another triumph for The Sun’s decade-long campaign.
We were spared rises in income tax, National Insurance and VAT rates.
The living wage goes up. The Universal Credit increase is maintained for longer. Those still furloughed have a few more months’ security. Likewise any self-employed still unable to work.
Billions were splashed out in grants or tax breaks to shore up and revive crippled firms.
There will be delight in the former Red Wall seats at the £1billion fund for regenerating towns — and in the eight sites for new, job-creating free ports.
Some young house-hunters will rejoice at new Government-backed 95 per cent mortgages, though we do fear prices will soar ever higher without a vast increase in the supply of properties.
But there was bleak news too.
Our overall tax burden is ultimately poised to rise to its highest in decades.
The freeze on tax thresholds from 2023 will hit millions. Mr Sunak justifiably claims no one will take home less than they do now, but the billions raised still come from workers’ increasing wages.
The sharp hike in corporation tax The Sun has warned against is coming too, but was wisely also postponed for two years and limited to the biggest firms.
We hope Mr Sunak will in time revise it downwards. There is surely a risk, if investment is still pouring in, of slamming a brake on it.
Official forecasts show depressingly flat growth beyond 2022 — but they may be pessimistic. No one can know how well the Chancellor’s plan will work.
What is certain is that Keir Starmer’s, such as it is, would not. His priority, a pay rise for NHS workers, is a strange way to tackle a gargantuan debt whether you agree with it or not.
The floundering Labour leader even resorted to resurrecting his failed “circuit-breaker lockdown” brainwave which Wales tested to destruction.
Yes, it is tough to respond to a Budget. Even so, Starmer’s vacuous riposte was one Jeremy Corbyn might have delivered.
It really was that bad.
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