Today’s post takes a look at the usual speculation in advance of the Summer Budget 2020, and at what actually happened.
Summer Budget 2020
It’s only seven months since the Tories defeated a Marxist-led Labour party on a manifesto which included no tax rises, lots of infrastructure upgrades and the “levelling up” of the North.
Since then we’ve had:
- A global virus pandemic, including 550K deaths globally and 44K here in the UK
- Stock market and bond yield crashes and recoveries
- An oil price shock and partial recovery
- A 15-week lockdown and slow re-opening
- UK interest rates cut to 0.25% – the lowest in history – and open discussion of the possibility of negative rates
- Race riots and toppled statues
Back in March, Rishi Sunak’s maiden Budget as chancellor included:
- More money for the NHS (“whatever it needs”)
- A furlough scheme to (temporarily?) preserve jobs in locked-down firms
- Continuity and bounce back loans and rates rebates
- £2bn of green spend (transport, pollution taxes, electric car charging points, tree-planting)
- £5 bn on gigabit broadband
- The scrapping of a planned cut in corporation tax from 19% to 17%
- Raising of NIC thresholds
- Postponement of the IR35 employment regulation changes for a year
- A cut in entrepreneur’s relief from £10M to £1M
- A 2% tax on tech firms
- A freeze on fuel duty and taxes on booze
- An increase in the pensions taper threshold to £200K pa, to help out NHS doctors
There’s a lot of support in there, but not much to kickstart a flatlining economy.
- Would today’s statement be different?
Whatever happened, this was set to be the most left-wing budget ever given by a Tory Chancellor.
- Commentary on what was actually announced today is in blue.
Employers are likely to be paid up to £10K (at £1K per new employee) to take on 16- to 24-year-olds for training/work experience.
- The £2 bn “KickStart” scheme will also pay the wages – strictly speaking, 25 hours per week of the minimum wage – of young people currently claiming Universal Credit, for six months.
These two ideas were confirmed.
The number of work coaches at jobcentres will be doubled.
There were rumours that a NIC holiday was planned.
- There was also a £1K “retention bonus” for taking someone back from furlough and keeping them until at least January 2021.
A £1.6 bn arts sector bailout was announced over the weekend, with £1.3 bn in grants and £300M in loans.
There were rumours of a (property) stamp duty holiday for six months to a year on the first £500K of any house price (saving up to £15K).
- The threshold has been increased to £500K until March 31st, 2021.
Homeowners will receive vouchers of up to £5K each towards energy-saving enhancements on their properties.
- Another £1 bn will be spent on retrofitting public buildings, bringing the total spend up to £3 bn.
Some commentators were suggesting that there might be a temporary VAT cut, though it didn’t seem to have much effect the last time it was tried.
- We have a six month cut from 20% to 5% on food, accommodation and attractions.
The triple lock on state pensions was under pressure, though as we have pointed out many times, the UK state pension remains the lowest in the OECD and the lock should remain at least until that is no longer the case.
The financial industry once again raised the prospect of higher-rate tax relief on pensions contributions being removed, but it seemed unlikely to be near the top of the Chancellor’s agenda.
- Nothing happened.
Boris pledged once again this month that his government would resolve the funding of social care in a fair manner, but the consensus was that this issue would be parked until the third budget of the year, in the autumn.
- Nothing happened.
There was some speculation over the weekend that the time might be right for a wealth tax, but I think this was press confusion over the launch last week of an initial report into how such a tax might work.
I’m not saying we’ll never have a wealth tax in the UK, just that introducing one the week after a study was launched would be strange timing.
- Nothing happened.
There were also suggestions that the fabled helicopter money might finally appear, in the form of the Resolution Foundation’s proposal for £500 vouchers (presumably electronic cards).
- These could only be spent in physical shops, restaurants and bars, and would expire after six months or a year.
So close, but no cigar – the actual scheme is almost comical in its restrictions:
- A maximum of £10 per head off meals at participating restaurants on Mondays, Tuesdays and Wednesdays – alcohol is of course excluded.
So handy – if you like a burger or some fried chicken.
Yet another anti-climax of a statement from a Chancellor.
- Or perhaps it just seems that way, in the context of everything that we’ve seen already this year.
Until next time.
Article credit to: https://the7circles.uk/summer-budget-2020/