On some counts, this Budget was Rishi Sunak’s 15th major announcement since his first Budget, just under a year ago. During this period, the pandemic has dominated the Chancellor’s actions and this was true of his latest Budget. To no small degree, the framework for Mr Sunak’s latest appearance at the despatch box had been set by the data-dependent (but date-filled) road map outlined by the Prime Minister nine days before the Budget.
Mr Sunak extended the main employment support schemes to the end of September. The most significant of these, the coronavirus job retention scheme (CJRS – furlough scheme), was covering 4.7 million employments at the end of January with a cumulative cost of nearly £54 billion. According to the Chancellor, the government’s total pandemic-related spending during 2020/21 and 2021/22 will amount to £407 billion. To put that figure into context, it is £14 billion more than the total amount that income tax will produce over the same two years, according to the Office for Budget Responsibility (OBR).
Such spending has left a hole in the UK’s public finances that the Chancellor has regularly said must be addressed. However, many outside bodies, from the International Monetary Fund to the Institute for Fiscal Studies, have told him that now is not the time to raise taxes. Their argument is that he should only address the deficit (£355 billion in 2020/21) once the economic recovery is firmly entrenched. In this Budget, Mr Sunak has largely followed that cautious advice, initially limiting his tax rises to the old stealth option of freezing most personal tax allowances and bands until 2026. However, from 2023 he has been bolder, with no less than a 6% increase in the rate of corporation tax. More changes may be aired on 23 March 2021, so-called ‘Tax Day’.