By ADAM GRAVELY
On Wednesday, 3rd March, Rishi Sunak, Chancellor of the Exchequer, delivered his second Budget to the House of Commons. Both occasions have been in response to the same tragic circumstances. The global coronavirus pandemic has been devastating to the United Kingdom. It has hit both the health and the wealth of the nation. To the beginning of March 2021, over 140,000 people had lost their lives, and that does not include anybody who died undiagnosed. The economy has suffered its worst performance since the Great Frost of 1709, with gross domestic product plummeting by 9.9% last year.
Mr Sunak has already taken many drastic decisions over the course of COVID-19. His first Budget as Chancellor in March 2020 had to present a strategy which kept the economy in a temporary freeze over the crisis. One year later and the occupant of number 11 Downing Street is still having to take measures not even seen in wartime to try and safeguard the livelihoods of the citizenry. At the time, he was criticised for not going far enough. At the coming of his second Budget, Mr Sunak is facing the same opposition for not taking a bold and long-term approach.
Politically, it is not currently bad news for the Chancellor. A YouGov poll following the Budget put the Conservative Party 13 points ahead of the opposition Labour Party. His boss, Prime Minister Boris Johnson, commands an 8-point lead over his rival, Sir Keir Starmer. It certainly helped that some popular policies are staying put for the time being. Two years ago, the prospect of the government paying the wages of 11.2 million people would have sounded unbelievable. However, this is set to be the norm for the foreseeable future. The flagship furlough scheme, or, to give it its full name, the Coronavirus Job Retention Scheme, will continue until September before being decommissioned.
This specific announcement will be welcome news to employees who are not allowed to go to work because of the lockdown restrictions. One of those industries reliant on the scheme has been non-grocery retail. Helen Dickinson, Chief Executive of the British Retail Consortium, welcomes this continued support for 600,000 employees who could very well be unemployed without it.
Representatives of British business have also offered a lukewarm response to some of the Chancellor’s tax announcements. Tony Danker, Director-General of the Confederation of Business Industry, welcomed plans to introduce a temporary, 130% tax super-deduction to reward investment in areas like manufacturing. However, Mr Danker branded the rise in corporation tax from 19% to 25% as a “sharp intake of breath” and a “worrying signal” to businesses wanting to invest in the UK. The Treasury’s argument for this decision, due to come into effect in April 2023, is that it will only impact those organisations making significant profits, and thus makes it the progressive thing to do.
Other responses have certainly not been welcoming. In his opposition statement, Labour Leader, Sir Keir Starmer, attacked Mr Sunak for a plan which was “papering over the cracks” and absent of a long-term recovery strategy. Labour stress that the health and social care sector, the heroes of the nation’s pandemic response, have been left in want for a funding solution to cope with the non-COVID backlog on their books. The British Medical Association has called it “a missed opportunity” to support a service and its workforce who have given so much. The Chancellor has rebuffed the criticism, saying that a cross-party consensus must be reached on a sustainable funding model.
Budget 2021 is not just about business or the machinery of the state. It is about individuals and families. For those on Universal Credit, there will be some relief that the £20 a week uplift will remain for six more months. This has been a lifeline for parents who would otherwise be going hungry just so that they can feed their children. Paul Johnson, Director of the influential Institute for Fiscal Studies, has questioned why the government is on course to stopping this increase in one go, rather than have a gradual wind-down like with the furlough scheme. The Resolution Foundation, a respected independent think tank, argue that the move will take £3 billion out of the economy and harm the recovery efforts, not to mention cost the poorest households 7% of their income over the year.
Times are certainly tough. Yet Rishi Sunak sought an optimistic tone for an economy that could be on the rebound. The Office for Budget Responsibility has predicted that the economy will rebound by 7.3%, the fastest rate since 1948. The Chancellor still faces a monumental task. UK plc has a debt bill at nearly 100% of the national income. Record low interest rates makes the current cost of borrowing more affordable, but the Chancellor has warned that it will take generations to pay back the bill. The alternative prospect, austerity, centrepiece of David Cameron’s government, is not welcomed either. It could risk the recovery that the four nations of the United Kingdom are relying on, as we hopefully take another step towards a post-pandemic world.
Image: Flickr / HM Treasury