March 2021 United Kingdom budget explained

United Kingdom budget
Parliament:58th
Country:United Kingdom
Previous Budget:September 2020 United Kingdom Winter Economy Plan
Previous Year:September 2020 statement
Next Budget:October 2021 United Kingdom budget
Next Year:October 2021
Presented:Wednesday 3 March 2021
Year:March 2021
Chancellor:Rishi Sunak
Party:Conservative Party
Total Revenue:£819 billion
Total Expenditures:£1.053 trillion
Deficit:£234 billion
Url:Budget 2021

The March 2021 United Kingdom budget, officially known as Protecting the Jobs and Livelihoods of the British People was a budget delivered by Rishi Sunak, the Chancellor of the Exchequer in March 2021.[1] It was expected to be delivered in autumn 2020, but was postponed because of the COVID-19 pandemic.[2] [3] [4] It succeeds the budget held in March 2020, and the summer statement and Winter Economy Plan held in summer and autumn 2020, respectively. The budget is the second under Boris Johnson's government, also the second to be delivered by Sunak and the second since Britain's withdrawal from the European Union. The budget was the first for government expenditure in the United Kingdom to exceed £1 trillion.

It was confirmed on the previous day that the Coronavirus Job Retention Scheme and the Self Employment Income Support Scheme had been extended to 30 September 2021.[5]

Key measures

In his budget speech, Rishi Sunak emphasized the effect the COVID-19 pandemic has had on the economy, with 700,000 people losing their jobs, the economy shrinking by 10% (the largest fall in 300 years), and the highest borrowing outside wartime.[6] [7] [8] It is expected that unemployment will peak at 6.5% (an improvement on the previous estimate of 11.9%) and that the budget deficit will reach £355 billion in 2021, or 17% of GDP, the highest level in peacetime.

Measures in the budget include:[9]

COVID-19

Taxation

It is expected that the measures will cause borrowing to fall to 4.5% of GDP in 2022–23, 3.5% in 2023–24, 2.9% in 2024–2025, and 2.8% in 2025–2026.

Business, digital and science

Health

Arts and sports

Environment, transport, infrastructure and housing

Nations and regions

Reactions

Labour Party leader Keir Starmer announced that the Labour Party will back plans to increase the corporation tax after Sunak announced any rises would be delayed to 2023; Starmer and Shadow Chancellor of the Exchequer Anneliese Dodds had previously voiced strong opposition to tax rises leading up to the budget.[12] [13] [14] However, Starmer has criticised the budget for doing little to address inequality and for prioritizing areas which are represented by Conservative Party MPs, arguing that the budget failed to "rebuild the foundations of our economy or to secure the country's long-term prosperity". Former Shadow Chancellor of the Exchequer John McDonnell similarly claimed that working people would be hit hard by the freeze to the income tax threshold and the cut to universal credit uplift.

Leader of the Liberal Democrats Ed Davey made similar criticisms, particularly in the area of social care.[15] Green Party co-leader Jonathan Bartley has asserted that the budget fails to include new incentives to shift towards a low-carbon economy.[16] Before the budget was announced, Leader of the Scottish National Party in Westminster Ian Blackford argued that the budget should not return to austerity; he called several measures, including extension of the furlough scheme, long-term investment in the National Health Service.[17]

There has been much discussion over the corporation tax raise. Rishi Sunak has claimed that even after the reform, the UK's headline rate would still be the lowest in the G7 nations and would raise an extra £17 billion. However, several commentators and business-persons have suggested that the move could make the UK less attractive to investors and hit dividends; the UK would not look as competitive internationally on other measures because it is much less generous in the share of capital spending that companies are allowed to set against taxable profits.[18] Former Conservative Justice Secretary David Gauke has advocated in favour of raising income tax rates rather than corporation tax, but noted that the Conservative Party's manifesto in the 2019 general election promised not to raise income tax, national insurance contributions and VAT.[19] In contrast, former Labour shadow ministers Ian Lavery and Jon Trickett supported raising corporation tax, arguing that it would hit the profits of big businesses rather than hard-pressed families.[20] Former Labour Shadow Secretary of State for Justice Richard Burgon warned that if the Labour Party does not support a raise in business taxes, it could be "outflanked" by the Conservatives.

Some commentators argued that the freeze in the income tax threshold would effectively increase an individual's tax burden, with the Office for Budget Responsibility predicting that more than one million people would start paying income tax in the next five years.[21] Similarly, some health officials voiced opposition to the budget for failing to include detailed plans for the National Health Service and public services.[22] Charmaine Griffiths of the British Heart Foundation warned that the NHS would not be able to tackle the backlog of treatment and care caused by the pandemic as the budget does not pre-empt the possible rise in COVID-19 infections in winter.

Culture industry leaders welcomed the budget, but called for more help for freelancers and insurance cover for events.[23] Julian Bird of the Society of London Theatre said the extension of furlough, self-employed support, business rates and VAT would help the industry, but urged the government to help those who "fallen through the gaps" of furlough and self-employed support. Cameron Mackintosh said that theatre producers would welcome the help given by the government, but called for more detail. Campaigners related to the Thalidomide scandal welcomed the support given to survivors.[24]

Notes and References

  1. Web site: Chancellor Rishi Sunak reveals date of next Budget. 17 December 2020. BBC News. 17 December 2020.
  2. Web site: BUDGET 2020: Delivering on our promises to the British people. 11 March 2020. HM Treasury. 11 March 2020.
  3. News: Sunak pumps billions into economy to combat virus. 11 March 2020. BBC News. 11 March 2020. en-GB.
  4. News: Covid crisis forces Autumn Budget to be scrapped. BBC News. 23 September 2020. 23 September 2020.
  5. News: 2 March 2021. Furlough support scheme to be extended in Budget until September. en-GB. BBC News. 2 March 2021.
  6. Web site: 2021-03-03. UK Budget 2021: the chancellor's speech in full. 2021-03-04. www.ft.com. en-GB.
  7. News: 2021-03-03. Budget 2021: Rishi Sunak vows to protect jobs but tax hikes loom. en-GB. BBC News. 2021-03-04.
  8. News: Partington. Richard. Walker. Peter. 2021-03-03. Budget 2021: key points at a glance. en-GB. The Guardian. 2021-03-04. 0261-3077.
  9. Web site: Budget 2021: What you need to know. 2021-03-04. GOV.UK. en.
  10. Web site: Waugh. Paul. 2021-03-04. Test And Trace Spending Will Top £37bn, Budget Small Print Reveals. 2021-03-19. HuffPost UK. en.
  11. News: 2021-03-03. Budget 2021: £1bn Towns Fund for 45 areas of England. en-GB. BBC News. 2021-08-17.
  12. Web site: 2021-03-03. Budget 2021: Keir Starmer backs delay in raising corporation tax. 2021-03-04. The Guardian. en.
  13. News: 2021-03-04. Budget 2021: UK's tax burden to 'reach highest levels since 1960s'. en-GB. BBC News. 2021-03-04.
  14. Web site: 2021-03-01. Labour indicates it would back gradual rise in corporation tax. 2021-03-04. The Guardian. en.
  15. Web site: 2021-03-03. Spend now, pay later: Sunak flags major tax rises as Covid bill tops. 2021-03-04. The Guardian. en.
  16. News: 2021-03-03. Budget 2021: No 'green revolution' from Sunak. en-GB. BBC News. 2021-03-04.
  17. Web site: Blackford. Ian. 2021-03-01. The Chancellor cannot row back on our recovery from the pandemic with a return to austerity. 2021-03-04. Scottish National Party. en-US.
  18. News: Investors lambast Sunak's plans to raise corporation tax. 2021-03-05. Financial Times. 4 March 2021 .
  19. Web site: Gauke. David. 2021-03-02. Rishi should raise income tax, not corporation tax. 2021-03-05. www.standard.co.uk. en.
  20. News: 2021-03-02. Sir Keir Starmer's critics in Labour become increasingly vocal. en-GB. BBC News. 2021-03-05.
  21. News: 2021-03-03. Budget 2021: Million more set to pay income tax by 2026. en-GB. BBC News. 2021-03-04.
  22. Web site: 2021-03-03. NHS, social care and most vulnerable 'betrayed' by Sunak's budget. 2021-03-04. The Guardian. en.
  23. News: Arts. Lanre Bakare. correspondent. culture. 2021-03-03. Culture sector cautiously welcomes budget but says further support needed. en-GB. The Guardian. 2021-03-04. 0261-3077.
  24. Web site: 2021-03-03. Thalidomide scandal: Sunak pledges lifetime support for survivors. 2021-03-04. The Guardian. en.

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