The United Kingdom’s Chancellor of the Exchequer, Rishi Sunak has announced an additional 65 billion pounds ($91 billion) in support of the British economy, also extending job support programs and temporary tax cuts to help workers and businesses.
In his annual budget speech, Mr Sunak said his plans for the next fiscal year would “protect the jobs and livelihoods of the British people” through September as the government slowly lifts the lockdown that have kept businesses closed across the UK
The British economy shrank by 10% in 2020 and more than 700,000 people have lost their jobs. According to the Chancellor, the government had borrowed a record £355bn this fiscal year (April 2020-April 2021), which he said was the “highest level of borrowing since World War Two”.
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He admonished that whiles it is too soon to cut government spending, “corrective action” would be needed to tackle the UK’s rising debt, therefore employing the government to start getting its finances in order so it doesn’t saddle future generations with “unmanageable debt.”
Mr Sunak posited that a way to do away with the “unmanageable debt” will be to increase the rate of corporation tax to 25% in 2023 from 19%. He explained that small businesses with profits of £50,000 ($69,911.50) or less won’t be affected, while only businesses with profits of £250,000 ($349,557) or more will be taxed at the full 25% rate.
The Chancellor also announced the income tax personal allowance – the level above which people pay income tax – will be frozen at £12,570 ($17,575) from next year until 2026. And the threshold for higher rate income tax will be frozen at £50,270 ($70,309) over the same period.
“These are significant decisions to have taken, decisions no Chancellor wants to make. I recognise they might not be popular. But they are honest.
“An important moment is upon us. A moment of challenge and of change. Of difficulties, yes, but of possibilities, too. This is a budget that meets that moment.”
Chancellor Sunak during his speech also acknowledged that the COVID crisis had caused “acute” damage to the UK economy and said it would take “this country – and the whole world – a long time to recover from this extraordinary economic situation”.
He however vowed that, “We will recover. I said I would do whatever it takes; I have done and I will do.”
Addressing UK’s furlough scheme, Mr Sunak announced that the initiative has been extended until the end of September. He also confirmed that businesses will be asked to contribute 10% of their employees’ wages for hours not worked in August and 20% in September, 2020.
Additionally, those buying houses will enjoy an extension of the stamp duty holiday on purchases below £500,000 until the end of June, while Mr Sunak also confirmed a government guarantee on mortgages up to £600,000 with a 5% deposit.
According to the Office for Budget Responsibility (OBR), the UK economy is forecast to grow by 4% this year and by 7.3% in 2022.
