Chancellor Rishi Sunak will extend the furlough scheme until the end of September when he delivers the 2021 Budget at lunchtime on Wednesday (March 3).
He will also pledge to do “whatever it takes” to help people and businesses through the coronavirus crisis.
The Chancellor is set to outline a three-point plan to support people through the coming months, rebuild the economy and fix the ravaged public finances in the wake of the pandemic.
In his statement to the Commons, he will build on the £280 billion package of support already given by the Treasury during the crisis.
Here is what we know so far:
The furlough scheme, which has protected 11 million jobs since its inception, will continue until the end of September, but the Government’s contribution will be tapered from July – with employers asked to pay in alongside the taxpayer for the cost of furloughed employees.
In July, employers will be expected to contribute 10%, increasing to 20% in August and September, as the economy reopens. Employees will continue to receive 80% of their salary for hours not worked until the scheme ends.
The Chancellor will also announce further support for self-employed workers, with more than 600,000 people – many of whom become self-employed in 2019/20 – now eligible for cash grants.
The Tory manifesto in 2019 promised not to raise the rates of income tax, National Insurance or VAT. But Mr Sunak is reported to be considering a freeze in the thresholds at which people start paying income tax or move into higher brackets – meaning more people would be dragged into those categories as wages increase.
Freezing the £12,500 threshold at which people start paying tax would bring in an estimated £5 billion and freezing the £50,000 threshold where the 40p rate kicks in would bring in £1 billion by 2024-25.
Corporation tax also appears in line for a hike, with Joe Biden’s plan to raise taxes across the Atlantic giving the Government political cover to increase the rate while still maintaining international competitiveness.
Mr Sunak is thought to be considering an increase in the tax on profits from 19p in the pound to between 23p and 25p.
It is also worth keeping an eye on the timing of any tax rises and how they will fit in with the next general election, due in 2024. Could the Chancellor be thinking of increases now, only to have a pre-election giveaway later?
Mr Sunak is also expected to outline plans to allocate:
- £5 billion for a new grant scheme to help businesses
- £1.65 billion to boost the UK’s vaccine roll-out
- £520 million to support small UK businesses with training and software
- Nearly £410 million to support the badly-hit culture sector
- £300 million to help cricket, tennis and horse racing in a summer sports recovery package
- £150 million to help local communities save struggling pubs, sports clubs, theatres and Post Offices
- £2.8 million to help fund a joint UK and Ireland bid to host the 2030 football World Cup.
Ahead of the Budget, Mr Sunak said: “Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK.
“There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”
The Chancellor will pledge to use the Government’s full “fiscal firepower” to protect jobs and livelihoods, vowing to do “whatever it takes” to help businesses and people.
He is expected to tell MPs: “First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s Budget we begin the work of building our future economy.”
The extension to the furlough scheme was welcomed by business organisations, with the CBI’s chief economist Rain Newton-Smith saying it will keep “millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown”.
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