For the first Budget of a new Government, that of one with a significant majority, perhaps many of us were surprised by the announcements made by Rishi Sunak, the Chancellor.
Typically, we might have expected some key and significant public sector spending announcements but equally some perhaps less palatable tax takes or reductions in reliefs to, in part at least, balance the books.
To coin a Chinese curse ‘may you live in interesting times’ one of chaos and distribution is probably an understatement. We are barely into the start of the new year, one which has seen us finally leave the EU, and instead of our news being dominated by coverage of Brexit, it has been dominated by the coronavirus epidemic.
When looking to deal with the serious potential impact of Covid19 on the nation’s health and financial wellbeing, the Chancellor and Government cannot be accused of washing their hands of their responsibility. The potential impact on the UK could include temporary but significant absenteeism in the workforce, disruption to supply chains and loss of revenue and reductions in productivity for many businesses and organisations. The impact on those who are self-employed, part of the Gig economy or on a low wage will see the need for specific support. Equally it is likely to place the NHS under further pressure as it seeks to look after the health and wellbeing of those affected. Measures to safeguard those at risk and the health of all, with the potential for the closure of schools, self-isolation and even lock down, will no doubt have wider social and financial ramifications.
The announcement of a package of £30bn was a tonic to all seeking to support people and businesses affected through what it is hoped to be a temporary disruption. Amongst the measures announced were changes to the timing for making statutory sick pay (SSP) for employees and the pledge for the Government to fund SSP for those with 250 employees or less, the provision of a £500m hardship fund, the introduction of a Government backed loan fund for those businesses affected and an extension to the ‘time to pay’ with HMRC. Retailers and those in sectors more heavily hit, be it a loss of consumer demand and revenue, are set to gain relief with the abolition of Business Rates through the small business rates relief. The good news for the NHS and those charged with looking after our health is the seemingly blank cheque to deal with the situation.
Perhaps it could be described as a Budget of two halves, the second aimed at focusing on our future prosperity. He certainly announced an eye watering public sector spending spree, one which might have a number of people reaching for the toilet roll stock piled over recent days. We still have to add up the millions or rather billions of pledged support, some of it over the lifetime of this parliament and some to come much sooner. With one of the biggest public sector infrastructure spending sprees for over 30 years, if not longer, we are set to see major improvements in transport infrastructure, healthcare, education, as well as addressing issues of flooding and the environment. We also heard of plans for significant investment in Research & Development, including increases to the provision of R&D tax reliefs. In fact there was so much seemingly pledged on so much that it is impossible to cover all here.
Therein lies the rub, how is it being paid? Whilst all will no doubt benefit from some aspect of the spend, it was hard, from the announcement, to see where the money was coming from to meet the cost. It would not have been unreasonable or unrealistic to see significant changes to taxation, with reduction in reliefs, allowances and increased tax rates to offset in part or in full the spend. Surely it is naïve to think it is coming from existing tax take or perhaps a mix of increased public sector borrowing. The focus or rationale seems to be one of investing for the future, with spending today generating tax take in the future.
As ever the devil is in the detail and certainly our team of tax professionals are busy reviewing the Treasury’s statements following the Budget. We expect to be much better placed to advise clients, businesses and individuals once the dust has settled. More detailed commentary will be covered in the special Budget edition of our podcast, The Streets Sessions, which will be aired on Friday.