The Courier & Advertiser (Angus and Dundee)
Long road to recovery
Chancellor Rishi Sunak’s £65 billion package to protect jobs post-pandemic
Rishi Sunak has unveiled a £65 billion coronavirus support package to “protect jobs and livelihoods” as Britain emerges from the pandemic.
The chancellor confirmed the furlough scheme, 5% VAT rate for hospitality and Universal Credit uplift would all be extended until September.
Mr Sunak also allocated billions of pounds in business grants and tax cuts to help employers while lockdown restrictions remain and the economy recovers from the worst recession in 300 years.
Official figures show more than 700,000 people lost their jobs in the last year, while the economy took a 10% hit.
Despite positive Office for Budget Responsibility (OBR) forecasts of growth at 4% this year and 7% next year, Mr Sunak warned that repairing the longterm damage “will take time”.
He said: “We have announced more than £280bn of support, protecting jobs, keeping businesses afloat, helping families get by.
“Despite this unprecedented response, the damage coronavirus has done to our economy has been acute.
“It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation.”
Mr Sunak said the Budget deficit – the gap between spending and receipts – would soar to a peacetime record of £355bn this year, or 17% of GDP, in a reflection of the scale of the government response to Covid-19.
The tax burden will also increase to its highest level for more than 50 years, with corporation tax hiked to 25% from 2023.
The OBR said raising the headline corporation tax rate, freezing personal tax allowances and thresholds, and taking around £4bn a year more off annual departmental spending plans would raise a total of £31.8bn in 2025-26.
The measures announced in the Budget increase the tax burden from 34% to 35% of gross domestic product (GDP) – a measure of the size of the economy – in 2025-26 to “its highest level since Roy Jenkins was chancellor in the late 1960s”.
To offset the long-term tax hit on businesses, Mr Sunak unveiled what he described as the “biggest business tax cut in modern British history” to encourage renewed investment to kickstart the economy.
Under the so-called super-deduction scheme, businesses which invest in the next two years will be able to claim 130% of the cost against their tax bill.
He said that such a scheme had “never been tried before in this country” and would make the UK the most competitive advanced country for investment.
Fuel duty will be frozen for the 10th year in a row and alcohol duties for the second year.
In addition, the Treasury will establish a new recovery loan scheme providing finance for companies of between £25,000 and £10 million.
In the hope of preventing a new unemployed generation of the young, Mr Sunak also announced that firms which took on new apprentices would get grants of £3,000 – double the present support.
On top of all the Uk-wide schemes, Scotland will receive an additional £1.2bn in Barnett consequentials as a result of additional spending.
Mr Sunak said the plan demonstrated the “strength and stability of our economic union”, adding: “This Budget will ensure the people of Scotland continue to be supported through our plan for jobs, committing more than a billion pounds in extra investment and funding to help fuel the UK’S recovery.”
Labour leader Sir Keir Starmer said the Budget was a “quick fix, papering over the cracks” but “didn’t even attempt to rebuild the foundations of our economy or to secure the country’s long-term prosperity”.
“The scale of what the chancellor announced today is nowhere near ambitious enough,” he told MPS.
SNP Westminster leader Ian Blackford agreed, telling MPS the Budget “completely failed to deliver”.
He added: “The chancellor has produced a Budget that offers people the bare minimum, a Budget that completely fails to take responsibility for the mess that they have made of Brexit.”
Mr Blackford also took aim at plans to spend in devolved areas through the levelling up fund, he said: “For a year now, the Tories have been in panic, privately planning for an independence referendum that they publicly say won’t happen.
“The purpose of the Internal Market Bill, of the Union Unit and the now socalled Levelling-up Fund is crystal clear – they are all an attack on devolution.
“The chancellor is undermining our parliament and centralising resources and decisionmaking at Westminster.”
Despite Mr Blackford’s attack on the Budget, business groups in Scotland have welcomed some changes, in particular, to the furlough scheme.
Andrew Mcrae, the Scotland policy chair of the Federation of Small Businesses, said the announcements “give the bulk of Scotland’s small business community more fuel to get through the last lap of this crisis”.
“The damage coronavirus has done to our economy has been acute. Chancellor
Hospitality will benefit from alcohol duty being frozen, 5% VAT for the next six months, an extension of furlough and additional grant schemes following yesterday’s Budget.
But a leading figure in the Tayside hospitality industry has warned that more still needs to be done to help a business battered during the global pandemic.
Manny Baber, general manager of Sleeperz Hotels Dundee and chairman of Dundee and Angus Visitor Accommodation Association, said the reduction on VAT continuing announced in the Budget is good news.
He said: “News of an extension to VAT cuts for hospitality businesses is welcome but I’d like to see the chancellor go further and extend it for another year.
“Hospitality has been hit especially hard by this pandemic and hotel operators need continued support to rebuild effectively.
“Business rates holidays and VAT at 5% for another year is essential if we are to return to profitability and begin to pay down the sizeable loans taken out while accommodations have been closed.
“Nor is it fair to pass price hikes on to the British public, desperate for staycations and social reunions this summer but that is surely unavoidable if government returns VAT to its previous rate of 20%.
“The extension of the furlough scheme until the end of September is also a vital support mechanism and fundamental to protecting jobs in hospitality, an industry which contributed £133.5 billion to the UK economy in 2019 and accounts for almost 10% of UK employment.”
Andrew Mcdonald, director of Andreou’s Bistro in Arbroath, said that while the announcement on furlough extension and continued VAT reduction is indeed welcome, businesses in the hospitality industry need long-term help.
“We definitely need support long-term as we have been closed for pretty much most of the year so, for me, it is a necessity for it to be extended,” he said.
And with 11 staff currently furloughed because he can only offer takeaways just now, without the scheme he would be forced to make lay-offs.
Andrew added: “All my staff are either on full-time furlough or part-time furlough so if restrictions were still in place long term I will need to keep people on furlough.
“If there were restrictions and furlough wasn’t available from the government then I’d probably have to make reductions in staff, so that’s what it is.
“If we are able to open as normal, then I won’t need furlough. It just depends on how we can open. We need some sort of help in terms of wages if restrictions are still in place.
“Being extended until September gives us an opportunity to try and return to normality over the summer.”
Lee Deans of Deans Restaurant in Perth was delighted to see the furlough scheme continue, as it has ensured he has not had to let any of his employees go.
He said: “It is a massive thing for us. It means that we’ve managed to retain all of our members of staff since March last year. We haven’t lost anyone and kept everyone in a job.
“It’s great to have but we just don’t know what it’s going to be like when we reopen. It will probably be a good couple of weeks and then maybe a steady uptake as things begin to get back to where you were before with the levels of business.”
Graham Bucknall of TBC Pub Company, which has The Bridge Inn at Ratho and The Ship Inn at Elie in its portfolio, said Mr Sunak could have taken the chance to reform VAT.
He continued: “As an industry we’ve been campaigning for years for more fairness in VAT, to bring us in line with the low rates enjoyed by supermarkets in the UK and by hospitality businesses in Europe. It took a pandemic to get rates to that level.
“Disappointing now to see that rates will be put back to the former high levels with no attempt to look at the benefits to the UK economy from maintaining low rates for UK hospitality businesses.”
Homebuyers across the UK will benefit from a government pledge to guarantee 95% mortgages.
Chancellor Rishi Sunak used the Budget to announce plans to help turn “generation rent into generation buy” by allowing them to get on the property ladder with just a 5% deposit.
He also announced the threshold for stamp duty, a tax on property sales, will remain at £500,000 until June 30, before dropping to £250,000 at the end of September when it will halve again to its original level.
The chancellor was pressured to extend the deadline as so many vendors were trying to complete their purchases before the end date.
However, Stamp Duty is only applicable in England and Northern Ireland, and local property experts are now calling on the Scottish Government to follow suit with the Scottish equivalent, the Land and Buildings Transaction Tax (LBTT).
Jim Parker, managing director of Fife Properties, said failure to do so could cause cross-border resentment between homebuyers.
“The Scottish Government have to follow some sort of suit (LBTT) – purely because you can’t expect everyone to get to the end of March and fall off a cliff edge,” he said.
“I wouldn’t be surprised if the Scottish Government go one stage further with an extra measure.
“For example, if you have committed to buying your house – by signing the missives – by the end of June they’ll let you have the duty, even if the paperwork is still to be finished.”
He added that Mr Sunak’s revelation that unemployment levels had not been as bad as previously feared was good for the property market.
“They are coming in at just over 6% in their predictions – if that is accurate that will be extremely good for the housing market,” he said.
“If people still have jobs they’ll not lose their house
– there’ll not be mass repossessions. What happened in Fife in the 2008 crash was a lot of people lost their jobs and lost their houses as a result. House prices crashed because a flood of properties came on the market at the same time.
“That’s not happened this time and that’s not predicted to happen as people will still have jobs as the furlough scheme has been extended.
“It’s good news for the housing market overall.”
Peter Ryder, managing director of Thorntons Property Services, said it would be interesting to
see how the Scottish Government reacted to the extension of Stamp Duty relief as they had previously indicated the LBTT holiday would end in March.
“They are not under the same pressure to do this as England due to the differences in the legal systems so I suspect they will continue with their original decision,” he said.
“The chancellor’s announcement that firsttime buyers will get a government guarantee on mortgages, with a deposit of 5%, is most welcome. This will help first time buyers get onto the housing ladder which in turn
stimulates the rest of the property market. This should lead to an increase in property transactions.
“Extension of the furlough scheme should help secure jobs and in the longer term this will help the economy get back to normal sooner.
“The property market in Scotland is currently performing well with properties selling fast. Stock levels are low. However, with the easing of restrictions over the next few weeks we expect a bounce back similar to July last year.”
The new mortgage guarantee has been signed up to by several major lenders, including Lloyds, Barclays, Natwest, Santander and HSBC.
Virgin Money is expected to follow suit.
Greig Brown, mortgage operations director at Aberdein Considine, said: “The introduction of the new 95% mortgage guarantee scheme by the chancellor is extremely welcome and will provide a timely boost for thousands of home buyers who have been locked out of the market for a year with lenders looking for 10% or 15% deposits.”
However, the Scottish Government said it had already set out its position on the LBTT in its January budget.
A Scottish Government spokeswoman said: “Delivering the Scottish Budget 2021-22, Finance Secretary Kate Forbes confirmed the Scottish Government’s intention that the temporary change to the residential LBTT nilrate band would come to an end on March 31 as planned.
“The first-time buyer relief will continue to be available, meaning that an estimated eight-out-of-10 first-time buyers will pay no LBTT at all.
“Between November 2020 and January 2021 transactions were 28% higher than the corresponding threemonth period a year ago, and our decision to temporarily increase the LBTT nil rate band to £250,000 until March 31, 2021 has clearly supported the recovery of the residential property market this financial year, as intended.”