Spring Budget: Furlough scheme extended to the end of September 2021

Introducing his second Budget, emphasising that he will still do ‘whatever it takes”’ Chancellor Rishi Sunak said that his focus was on preventing the growth of unemployment as the country emerges from the latest lockdown.

While the undoubted success of the vaccination programme suggested that there would be a strong recovery, he warned that there would be dangers ahead if the Government failed to prepare for the need to eventually rebalance the books, given the unprecedented sums that it had spent in battling the effects of the pandemic.

Support will be extended well beyond the end of the roadmap out of lockdown, Mr Sunak said, before setting out a three-part plan:

  • first, support people and businesses
  • once on the way to recovery, take time to fix public finances; and then
  • begin building the future economy

Furlough scheme extended

The Job Retention (furlough) Scheme was originally established in March 2020 to assist organisations with retaining staff through business restrictions put in place as a result of the coronavirus pandemic. Since then, it has been extended numerous times in response to the developing situation with the virus. Now, with plans for reopening businesses over the next few months being announced across the UK, the government has confirmed that the scheme is to be extended again, this time until 30 September 2021.

As before, furloughed workers will still get 80 per cent of their wages for the time in which they do not work, subject to a monthly maximum. However, from July, the government will start reducing their contribution to the scheme, similar to the way they started to phase it out last year before it was extended at the end of October.

From July 2021, the government will contribute 70 per cent of wages for unworked hours, with organisations asked to provide the remaining 10 per cent. In August and September 2021, they will contribute 60 per cent, meaning organisations must provide 20 per cent.

If all goes to plan, this news means that the furlough scheme will remain an option for eligible organisations even after the lifting of all lockdown restrictions in England on 21 June, something that may occur sooner in Scotland and Wales but has yet to be confirmed. Presumably, this is to assist organisations in gradually working towards pre-pandemic normality whilst also allowing for any delays to England’s roadmap out of lockdown that may occur if the government’s tests for easing restrictions, at any stage, are not passed.

Further support for businesses and people

An extra £1.65 billion will ensure that the Covid-19 vaccination roll-out in England continues to be a success, Mr Sunak said.

Further grants for the self-employed will be targeted at those most affected. Those suffering more than a 30 per cent drop in profits will get the full grant, others will get a percentage. The newly self-employed were previously excluded but, if they have filed a tax return by 2 March 2021, they can now claim.

Extending support to the lowest paid, the extra £20 per week paid to Universal Credit claimants will continue for another six months. Furthermore, the National Living Wage (NLW) will rise to £8.91 from April. There will be a one-off payment of £500 to eligible Working Tax Credit claimants across the UK.

A new restart grant will be available in April to help the businesses re-opening first with grants of £6000. The later ones such as gyms, as they will face more problems, will get £18,000.

In addition, £700 million will be made available to help the creative sector to re-start.

While Bounce Back Loans are ending, a new Recovery Loan scheme will offer sums of between £25,000 and £10 million backed by an 80 per cent Government guarantee.

Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.

Rates, Tax and Mortgages

The 100 per cent business rate holiday will continue through until June, with a two-third discount for rest of the year. The 5 per cent reduced rate of VAT for hospitality, accommodation and attractions across the UK will be extended to the end of September and will only return to normal levels in stages, starting with 12.5 per cent until 31 March 2022.

The Stamp Duty relief level of £500,000 will be extended to 30 June when the nil rate band will double until the end of September. A new Mortgage Guarantee scheme will provide help for those with just 5% deposits meaning 95 per cent mortgages on offer from April.

Pay back

The £65 billion being provided by this Budget puts the total Covid support package at over £400 billion. To sustain this defence of people and jobs, the Government has borrowed at a rate only seen during wartime.

While the time was not right for detailed rules and targets, the Chancellor emphasised that the State should not be borrowing to pay for everyday spending. It cannot let debt rise indefinitely, he went on, but it can use low interest rates to invest in capital projects.

Two new measures will, Mr Sunak said, “ask more from those who have most”:

  • Personal tax thresholds will be frozen after the next rise and maintained at that rate until 2026 as will the VAT threshold.
  • In 2023, the rate of Corporation Tax paid on profits will go up to 25% (still the lowest in the G7). Small businesses with profits below £50,000 will stay at the 19 per cent rate and only 10 per cent of firms will pay the full rate.

On the other hand, he offered businesses two new concessions.

  • With regard to the tax treatment of losses, they can now carry back up to £2 million for three years (worth up to £760,000 per company); and
  • To unlock investment, he is introducing a “super deduction” for future investment which will enable firms to reduce their tax bill by 130 per cent of the cost of their investment. This is worth around £25 billion to UK companies over the two-year period the scheme will be in full effect.

Duties

Planned increases in duty on spirits, wine, beer and fuel duty are all cancelled.

Training and Recruitment

Two new training schemes will help small businesses to become more productive.

They are:

  • Help to Grow Management – offering world class management training with mentoring and with the Government covering 90% of the cost; and
  • Help to Grow Digital – offering small firms free training and 50 per cent discount on software.

Enrolment for both will be open in the near future.

Employers taking on new apprentices of any age will see the incentive payment double to £3000 and £7 million will be made available for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.

The Home Office will be announcing ambitious visa reforms to allow the best talent in science, technology and innovation to come from around the world to work in the UK.

Going Green and Regional

The first UK Infrastructure Bank will be opened in Leeds with £12 billion provided by the Government and with a further £28 billion expected to be available from other investors. There will also be a new retail savings product – Green Bonds – which will encourage investment into projects dedicated to accelerating the UK’s push to become a net-zero economy.

Major Government Departments including the Department for International Trade (DIT), Department for Business, Energy and Industrial Strategy (BEIS) and the Treasury are to establish a ‘campus’ in Darlington.

A Levelling-up Fund will be launched inviting applications from local authorities across the country and there will be over £1 billion funding for a further 45 towns in England through the Towns Fund, supporting their long-term economic and social regeneration as well as their immediate recovery from the impacts of the pandemic.

Freeports

Bids were invited by the Government last year for areas wishing to establish Freeports. These are planned to make it easier and cheaper to do business with cheaper customs and reduced regulation on building and investing.

The eight areas in England chosen to become Freeports are:

  • East Midlands airport
  • Felixstowe and Harwich
  • Humber
  • Liverpool city region
  • Plymouth
  • Solent
  • Thames
  • Teesside

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