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Budget 2020

PIA News Article

Chancellor Rishi Sunak today delivered his first Budget as Chancellor of the Exchequer against a backdrop of concern about the Covid 19 outbreak.

He opened his speech by getting straight to the topic on most people’s minds, giving a nod to the nation’s stoicism by saying that the British public are ‘concerned but not daunted’ by the virus.

Coronavirus

Mr Sunak acknowledged that the economy will be negatively affected and that this could not be avoided, with estimations of up to a fifth of people of working age having to self isolate, supply channels being disrupted and consumer spending reduced. The impact is however expected to be temporary.

He outlined his plan to make this the biggest spending Budget for a generation, then announced a raft of measures to support the country through this challenging period including:

Business Support

He went further in his pledges to support small to medium sized businesses by announcing a Coronavirus business interruption loan scheme, an abolition of business rates in the coming year (for qualifying small to medium sized businesses) and even a £3,000 cash grant for companies already eligible for small business rates relief.

The total fiscal stimulus to combat the impact of Coronavirus will be £30bn.

Growth

Mr Sunak thanked Robert Chote, the outgoing Chairman of the Office for Budget Responsibility for his work over the past decade, before summarising the growth forecasts.

The projections have been revised downwards, even before the impact of Covid 19 has been accounted for, which is disappointing news but not unexpected given the ongoing uncertainty around Britain’s future relationship with the EU.

The Chancellor did try to strike a positive tone however and reported that the OBR have indicated the measures in the Budget will increase growth by 0.5% above what they would be without those measures. The measures are also projected to increase output by 2.5%.

Borrowing

Mr Sunak reported that the budget deficit as a proportion of GDP is down from 10% in 2010 to 2% today. He also said debt as a proportion of GDP is forecast to fall from 79.5% this year to 75.2% in 2024-25.

The Chancellor paved the way to remove the fiscal restrictions put in place by his predecessor by reporting that the borrowing forecasted in this Budget is within the fiscal rules, but he will review these rules in the autumn. Commentators suggest that this will be seen as a victory for some in the Tory party, as it will allow looser constraints on spending on newly won seats across the North of the country.

Tax

Mr Sunak delighted in telling a full House of Commons that the Conservatives are the ‘real workers’ party’ and announced plans to increase the threshold at which people start paying National Insurance from £8,632 to £9,500, saving the average worker £100 a year. Ultimately, the Tories want to increase the threshold to £12,500 over five years.

Pubs

There was cheer for landlords as Mr Sunak announced that all alcohol related levies are to be frozen, with planned increases to spirits and beer duty cancelled, and the business rate discount for pubs will increase to £5,000 from £1,000.

Whisky makers may have been hoping for more than just a freeze however, especially in light of large tariffs on the import of scotch recently being imposed by President Trump in the USA; their largest single overseas market.

Fuel Duty

The fierce lobbying of Conservative MPs against a mooted rise to fuel duty seems to have paid off, with Mr Sunak announcing a freeze on the tax for one more year, making it 10 years in a row. This will be positively received across the board.

Entrepreneur’s Relief

It was widely expected that Entrepreneur’s Relief would be dropped altogether, but the Chancellor stopped short of that by reducing the lifetime limit from £10m to £1m.

It is seen as a largely ineffective relief and was therefore an easy target for bringing in a saving to the Exchequer, which has been projected at £6bn over five years.

Research & Development

R&D investment is set to rise to £22bn a year, including a £1.4bn investment in our science institute in Weybridge researching Coronavirus.

There will also be £800m invested in a new ‘blue skies’ funding agency, which is to be modelled on the American ARPA.

Environment

Although the fuel duty is frozen the Chancellor did announce plans to increase taxes on pollution. The climate change levy on electricity is frozen but will increase on gas from April 2022. There will also be a plastic packaging tax introduced from 2022, which will charge manufacturers and importers £200 per tonne if made of less than 30% recycled plastic.

The above, in addition to other measures, will raise £1bn, which will be spent on green initiatives such as investment in nuclear fusion and electric vehicles.

There will also be 30,000 hectares of trees planted and a doubling of the investment in flood defence systems to £5.2bn.

‘Levelling Up’

Mr Sunak said the government will triple its investment in transport and infrastructure to its highest levels since 1955, with huge plans to build 4,000 miles of road saying that “if the country needs it, we will build it”. As well as this, £5bn is to be spent on gigabit-capable broadband around the country.

He also pledged £640m, £360m and £210m for the Scotland, Wales and Northern Ireland respectively and said that West Yorkshire will have a directly elected mayor who will share a further £4.2bn with other metro mayors for transport investment.

A theme that has run through all recent Chancellor’s speeches has been a commitment to spread investment around the country and out of London, and Mr Sunak followed suit by announcing that 750 government jobs will move to an economic campus in the north of England, with a further 22,000 civil servant roles ultimately moving out of Central London.

NHS

The Chancellor reiterated campaign pledges by committing £6bn to employing 50,000 more nurses and building 40 more hospitals.

He also announced some money raising measures, with the NHS surcharge for overseas people rising by £624.

On pensions, there was little made in the way of announcements in the speech, but to ease the concerns of high earning doctors and consultants, the tapering thresholds will increase by £90,000 each to £200,000 and £240,000 from £110,000 and £150,000 earnings per annum. This means that people earning up to £200,000 don’t have to worry about having their annual pension allowance reduced at all; a move that will take 98% of consultants and GPs outside of the scope of the taper.

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