Rishi Sunak backs Freeport East in budget statement
- Credit: PA
Chancellor of the Exchequer Rishi Sunak came up with a budget full of Eastern promise for the region's MPs with millions of pounds heading for three large town towns and the long-awaited go-ahead for Freeport East.
But while his second official budget speech did concentrate on bringing the UK out of the Covid-induced recession, there were warnings that there could be a price to pay in the years ahead.
He confirmed that the furlough scheme would continue until September, that there would be no increase in fuel or alcohol duties - and that tax rates that were cut at the start of the first lockdown would remain low.
In confirming the furlough scheme would continue until September, Mr Sunak said employers would have to pay a contribution after July.
He said a July 2020 forecast suggested unemployment could peak at 11.9%, telling the Commons: “Today, because of our interventions, they forecast a much lower peak: 6.5%.
“That means 1.8 million fewer people are expected to be out of work than previously thought. But every job lost is a tragedy, which is why protecting, creating and supporting jobs remains my highest priority.
The £20 weekly increase for Universal Credit will continue for a further six months. He also said the minimum wage will increase to £8.91 an hour from April.
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On apprenticeships, Mr Sunak said: “I’m doubling the incentive payments we give businesses to £3,000 – that’s for all new hires, of any age.”
The 5% reduced rate of VAT will be extended for six months to September 30, with Mr Sunak telling MPs: “Even then, we won’t go straight back to the 20% rate.
“We’ll have an interim rate of 12.5% for another six months; not returning to the standard rate until April next year. In total, we’re cutting VAT next year by almost £5 billion.”
On stamp duty, Mr Sunak told MPs: “I can announce today the £500,000 nil rate band will not end on March 31, it will end on June 30.
“Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September – and we will only return to the usual level of £125,000 from October 1.”
The chancellor told MPs the total Covid-19 support package amounted to £352 billion.
He said: “Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever faced and, by any objective analysis, this Government has delivered one of the largest, most comprehensive and sustained responses this country has ever seen.”
Mr Sunak said borrowing costs are “affordable right now” but warned interest rates and inflation may not stay low.
He told MPs: “This Budget is not the time to set detailed fiscal rules, with precise targets and dates to achieve them by – I don’t believe that would be sensible.
“But I do want to be honest about what I mean by sustainable public finances, and how I plan to achieve them.”
Borrowing will fall to 4.5% of GDP in 2022/23, 3.5% in 2023/24 then 2.9% and 2.8% in the following two years due to action he is taking.
He told MPs: “While underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023/24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.”
The Chancellor went on: “The amount we’ve borrowed is only comparable with the amount we borrowed during the two world wars. It is going to be the work of many governments, over many decades, to pay it back.
“Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked. When crises come, we need to be able to act. And we need the fiscal freedom to act. A freedom that you only have if you start with public finances in a good place.”
Mr Sunak said the Government will not raise the rates of income tax, national insurance, or VAT.
But he added: “Instead, our first step is to freeze personal tax thresholds.”
The Chancellor went on: “We will of course deliver our promise to increase it again next year to £12,570, but we will then keep it at this more generous level until April 2026.
“The higher rate threshold will similarly be increased next year, to £50,270, and will then also remain at that level for the same period.”
Fuel duty - and duty on alcoholic drinks - were frozen for another year. Mr Sunak said:
said he did not believe it would be right to increase the rates of tax on working people, telling MPs: “I believe our approach, while bold, is compatible with our duty as a fiscally responsible and business friendly government.
“This is the right choice and I’m confident it will command public assent.”
On duties, Mr Sunak told MPs: “I can confirm that the planned increases in duties for spirits – like Scotch Whisky – wine, cider and beer will all be cancelled.
“All alcohol duties frozen for the second year in a row – only the third time in two decades.
“And right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel. So the planned increase in fuel duty is also cancelled.”