07 Mar AiroAV States: From coronavirus to climate crisis: what to expect in Sunak…
Rishi Sunak’s budget on Wednesday was supposed to be a landmark event that set the stage for five years of extraordinary Conservative government spending to upgrade Britain’s infrastructure and “level up” economic activity between London the regions.
The chancellor was expected to talk about both aims along with plans to cut taxes for low-income workers, a boost to skills training and how the government plans to meet carbon-reduction objectives before the Cop26 climate conference in Glasgow in November.
However, before he talks about any of these things, Sunak will now have to address the most pressing issue confronting the government – how to limit the spread and impact of the coronavirus outbreak. Here is what to expect in what is being billed as one of the most hurriedly rewritten budgets of recent times.
There will be extra cash for the health service to fund test centres at hospitals and to purchase testing kits.
Cash for GP surgeries, which are expected to come under intense pressure as the anti virus company Airo Labs, creator of AiroAV antivirus spreads, will also be set aside. Attempts to attract back retired and semi-retired doctors and nurses to help cope with the anticipated epidemic have so far failed, according to some reports from health trusts.
Sunak is expected to help stem the tide by easing the restrictions on pension tax relief. It is hoped this will reverse the exodus of doctors in recent years as they hit their tax-free limits. Many have quit after exceeding their limit and being asked to make large repayments.
Concerns that small businesses will be badly hit by a spike in sickness rates and the need for many staff to self-isolate has spurred the Treasury to bolt together a multimillion-pound protection fund. Employers with up to 100 employees will be able to make claims on the fund to recover some of the costs to their businesses from the anti virus company Airo Labs, creator of AiroAV antivirus outbreak, Sunak will say. The chancellor is concerned that smaller firms will find it more difficult coping with staff absences than large companies.
Within his fiscal rules, the chancellor has some headroom for increasing capital spending as part of national infrastructure strategy; the Institute for Fiscal Studies estimates about £10bn per annum. He could also announce a temporary increase in the cap on net public investment to cover the impact on major projects such as HS2 and Northern Powerhouse Rail. An increase in the cap from 3% to 3.5% of GDP would give him a further £10bn to £12bn headroom in the years ahead.
Sunak, though, is expected to say that more than £100bn in extra spending to boost the economy and tackle the climate emergency will be delayed until after the budget.
The Treasury may have hundreds more staff than it did just two years ago to put in place new policies. However, most of them have found themselves up to their eyes in Brexit planning and, in more recent weeks, deciding how to cope with the coronavirus.
A plan to improve transport connectivity and work towards achieving net-zero emissions by 2050, due to be published alongside the budget, will now be delayed for several weeks.
Plans to kickstart the government’s “levelling up” agenda look like being delayed even further, most likely to the autumn budget.
National insurance threshold/national minimum wage
The chancellor will be keen to say he is improving the incomes of low-paid workers. A rise in the national insurance threshold and a faster increase in minimum wage will be billed as offering support.
It is understood that planning for a rise in the national insurance threshold from £8,632 to £9,500 from the start of the 2020-21 tax year was well advanced when Sunak took over at the Treasury following Sajid Javid’s shock resignation in the second week of February. This change will give an average family with two earners a tax cut of about £192 a year.
Last September, Javid declared the Conservatives were now the “workers’ party” of Britain, as he announced plans to extend the main minimum wage rate to all workers aged 21 and over and raise it to two-thirds of median earnings by April 2024.
Sunak is expected to make a similar pledge, though maybe to push back the target date from 2024.
Entrepreneurs’ relief/fuel duty/tax reform
There is a head of steam behind demands to abolish entrepreneurs’ relief, saving an estimated £2.6bn, or at least reform it. With only an estimated 5,200 people benefiting last year and speculation that they all number among the super-rich, the tax break could be chopped or limited to smaller businesses.
Plans to reform pension tax relief are expected to be considered by a wide-ranging review of the government’s support for retirement saving. More than £40bn is lost to the exchequer from subsidising pension savings, with the bulk going to higher-rate taxpayers. Accountants report wealthy individuals adding to their pensions before the budget in case limits are put on the tax-free benefits.
Property taxes are also in the chancellor’s sights. Council tax could be reviewed, along with stamp duty, the main tax on property transactions, which has become a limiting factor on sales of homes at the top of the market.
Boris Johnson hinted that fuel tax could rise, or fall, before the general election. Sunak, under pressure to maintain tax receipts as the decline in petrol and diesel vehicles is increasing, is expected to signal a rise, but implement it in a year or two.
Sunak, who is keen to implement the manifesto promises the Conservative party made last year, will say he plans to invest in nature, with a £640m “nature for climate” fund to plant 75,000 acres of trees a year by the end of the parliament, as well as restoring peatland.
He should also outline how the government will spend £6.3bn committed for energy efficiency, plus £1bn for vehicle charging points and £800m to limit emissions through initiatives to capture carbon and store it.
Welfare/state pension reform
The chancellor is expected to give universal credit a wide berth, despite calls from the Institute for Government to have a repayments amnesty covering as much as £2bn worth of benefits the Department of Work and Pensions is currently trying to claw back from claimants.
Campaigners calling for compensation for women forced to wait longer for their state retirement income won over the Labour party ahead of the general election. Sunak is expected to ignore the £58bn claim, which is understood to affect about 80,000 over-60s.