Spring 2020 Budget Breakdown
Weeks after taking the top job, the new Chancellor gave an impressive performance delivering a generally sensible Budget. The massive (temporary) fiscal stimulus package allocated to mitigate the economic impact of the coronavirus reveals the scale of challenge. For individuals, extending statutory sick pay (SSP) is welcome, as is removing the minimum income floor in UC to help the self-employed, but the group left out of today’s announcements are those on low or no hours contracts who are not eligible for SSP.
It is right that exceptional circumstances are met with exceptional measures. But it is also right that excluding the temporary coronavirus-related expenditure, the Government remains on track to meet the fiscal rules they established – we will see if they remain in place post-review. It is, however, disappointing that despite trailing several ideas for reforming the tax system to raise additional revenue, the only idea that made the cut was reducing entrepreneurs’ relief. At some point the Government will have to have a serious conversation about how to fund the increasing demand on public services.
Changing "the whole mindset of government"
😤 REACTIONARY POLICY
National Insurance give away
The National Insurance threshold will rise from £8,632 to £9,500 a year, costing an estimated £3 billion. The Chancellor heralded the "tax cut for 31 million people", but evidence shows that this tax break gives 10 times more to the highest paid than the lowest paid.
💬 QUOTE OF THE BUDGET
"All new spending will be accompanied by a rigorous new focus on outcomes. To support this, the government is conducting an exercise across departments to identify savings and projects that do not provide value for money or support these priorities. The government will redirect this spending through the CSR to help achieve its priorities."
👍 GOOD BUDGET FOR
Investing in ideas
Public investment in R&D will increase to £22 billion per year by 2024-25, in line with the Government's pledge of expanding the UK’s science, innovation and technology base, and bringing total R&D spending to 2.4% of GDP by 2027. At least £800 million will be invested in a new high-risk, high-reward research agency modelled after the US’s Defense Advanced Research Projects Agency (DARPA). This investment could have a significant impact on the UK’s ability to deliver cutting-edge innovations and remain a leader in life sciences.
Ending rough sleeping
Following the Prime Minister’s pledge to end rough sleeping in this Parliament, £643 million will fund move-on accommodation for up to 6,000 rough sleepers and support services, including specialist services for substance misuse.
Almost scrapping Entrepreneurs' Relief
The tax relief is widely seen as ineffective, having little impact on entrepreneurialism and benefiting the already wealthy. The Chancellor’s move to cut the lifetime relief from £10 million to £1 million is therefore welcome and will raise more than £6 billion over the Parliament.
👎 BAD BUDGET FOR
Aside from the welcome reduction to entrepreneurs’ relief, more courageous ideas – such as extending council tax and cutting high rate pension relief – floated pre-Budget, were abandoned. The start of a new Parliament is the time to take unpopular decisions, and the Chancellor may regret not taking this opportunity to shore up the public finances.
This Budget marks the passing of another fiscal event without the announcement of a sensible and sustainable solution to the social care funding crisis. The pledge to reach a cross-party consensus must not kick the issue further into the long grass.
As the UK prepares to host this year’s COP26 UN climate summit, the Budget includes key policies such as a Carbon Capture and Storage (CCS) Infrastructure Fund and £532 million for ultra-low emission vehicles. Despite these green measures, the Government has committed to freezing fuel duty for the tenth consecutive year, undermining their green credentials and costing the Treasury £800 million to fund for another full year.