Newly appointed Chancellor of the Exchequer, Rishi Sunak, delivered his first Budget on 11 March, against a backdrop of uncertainty following the COVID-19 outbreak and subsequent financial losses. It was the first of two Budgets to be delivered in 2020, with the second to follow in the autumn.
COVID-19 and the NHS
The Chancellor wasted no time in diving into the heart of the issue on the minds of so many across the nation: the COVID-19 crisis. Taking an empathetic tone, he reassured the British public that “we will get through this together” emphasising the temporary nature of the crisis and his firm belief in the ability of the British economy to weather the storm.
Mr Sunak then called on all parties across the House to support his £30bn fiscal stimulus, including welfare and business support, to “keep this country and our people healthy and financially secure.”
- £5bn emergency response fund to support the NHS and other public services
- Statutory Sick Pay (SSP) will be paid to all those advised to self-isolate even if they don’t have symptoms
- To support businesses employing fewer than 250, the government would refund up to 14 days’ SSP
- A Coronavirus Business Interruption Loan Scheme will support small businesses experiencing increased costs or cash flow disruptions, providing access to £1bn of government-backed loans
- Business rates in England will be suspended for 2020-21 for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000
- Any company eligible for small business rates relief will be allowed a £3,000 cash grant.
Mr Sunak promised an extra £6bn in NHS funding over the course of this Parliament, which would go towards delivering 50,000 more nurses and make progress on 40 new hospital projects.
The Economy and Business
On the morning of Budget day, the Bank of England (BoE) had announced an emergency cut in interest rates to bolster the economy amid the COVID-19 outbreak. BoE base rate was reduced from 0.75% to 0.25%, returning it to its lowest level in history.
The BoE said it would also free up billions of pounds of extra lending to help banks support firms. Mark Carney, the Governor of the BoE, was keen to emphasise that COVID-19 was a temporary economic shock, stating: “The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove sharp and large, but should be temporary.”
Pensions and Investments
To support the delivery of public services, particularly in the NHS, the two tapered Annual Allowance thresholds for pensions will each be raised by £90,000. So, from 2020-21 the threshold income will be £200,000, meaning individuals with income below this will not be affected by the tapered Annual Allowance and the Annual Allowance will only begin to taper down for individuals who also have an adjusted income above £240,000.
- For very high earners the minimum level to which the Annual Allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income over £300,000.
- The 2020-21 tax year ISA (Individual Savings Account) allowance will remain at £20,000.
- The JISA (Junior Individual Savings Account) allowance and Child Trust Fund annual subscription limit will be significantly increased from £4,368 to £9,000 in 2020-21.
- The Lifetime Allowance for pensions will increase in line with the Consumer Prices Index (CPI) for 2020-21, rising to £1,073,100.
- Flood defence investment of a record £5.2 billion over six years will better protect 336,000 properties.
- £300 million additional funding to improve air quality.
The Chancellor signed off his first Budget with these words: “We’re at the beginning of a new era in this country. We have the freedom and the resources to decide our own future. A future where we unleash the energy, inventiveness and creativity of all the British people. And a future where we look outwards and are confident on the world stage. That starts right now with our world-leading response to the coronavirus. This is a Budget delivered in challenging times. We will rise to this moment. We will get through this together.”
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