UK Spring Budget 2021: Rishi Sunak to use ‘fiscal firepower’ to save Covid-ravaged economy

Rishi Sunak will vow to unleash his ‘fiscal firepower’ to rescue Britain’s coronavirus-ravaged economy when he delivers his Budget tomorrow.

The Chancellor is set to launch a three-pronged economic plan to breathe new life into UK plc after one of the most disastrous years in history.

But his bid to protect jobs and livelihoods while putting the public finances on an even footing has sparked a furious Tory civil war over tax rises and public spending.

Boris Johnson has vowed to retain a decade-long freeze on fuel duty, but other taxes are set to rise to fill an eye-watering black hole created by furlough and other emergency measures.

But while Mr Sunak is expected to keep pouring money into the coronavirus response by extending the furlough scheme until as late as September, and retaining other bailouts, the Chancellor is also set to lay out a grim timetable of hikes to bring in more revenue and stop debt spiralling out of control. 

Corporation tax is almost certain to go up, while income tax thresholds could be frozen to drag more people into the higher bands. 

The plan has already sparked a massive backlash from Tories, while Labour is arguing that now is not the time to be increasing the burden on business.  

But former Cabinet minister Lord Hague has joined other senior Conservative figures including ex-Chancellor Philip Hammond in warning that taxes will need to go up.

Mr Sunak is expected to tell MPs in the Commons tomorrow lunchtime: ‘We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people…’

‘First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.

‘Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.

‘And, third, in today’s Budget we begin the work of building our future economy.’          

Boris Johnson

Boris Johnson

Rishi Sunak

Rishi Sunak

Boris Johnson (pictured left out jogging today) has signalled that Rishi Sunak (right) will avoid raising fuel duty as he insisted the economic recovery will be ‘powered by White Van Man’

Mr Hammond, who was chancellor under Theresa May, today said that the nation faced tax rises and public spending cuts to get on an economic even keel

Mr Hammond, who was chancellor under Theresa May, today said that the nation faced tax rises and public spending cuts to get on an economic even keel

Mr Hammond, who was chancellor under Theresa May, today said that the nation faced tax rises and public spending cuts to get on an economic even keel

Former Cabinet minister Lord Hague has joined other senior Conservative figures in warning that taxes will need to go up

Former Cabinet minister Lord Hague has joined other senior Conservative figures in warning that taxes will need to go up

Former Cabinet minister Lord Hague has joined other senior Conservative figures in warning that taxes will need to go up

Neighbours will be able apply for up to £250,000 to save a beloved boozer 

The Chancellor is set to pledge £150million to allow the British public to save their local pub or sports club on Wednesday.

Rishi Sunak will use the Budget to deliver a Community Ownership Fund to allow pub goers to bid for up to £250,000 to save their favourite local.

The fund, due to open for applications in the summer, is designed to help community groups to take over struggling pubs or other community assets in their area in order to keep them going.

In ‘exceptional circumstances’, applicants will be able to bid for up to £1million to save important and beloved community assets such as sports grounds and clubs.

Mr Sunak said: ‘Pubs and sports clubs are the heart and soul of our local towns and villages – they’re the glue that keeps us together.

‘This fund will help to ensure vital local institutions aren’t lost to those who treasure them most.’

The scheme is cash-match based so community groups will have the opportunity to double their money if they are able to raise the funds to help keep their pubs and sports clubs open.

The hope is that this fund will help the pub sector bounce back from the pandemic as fears have mounted that thousands will not be able to reopen when the country is eased out of lockdown. 

 

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Mr Hammond, who was chancellor to Mr Johnson’s predecessor Theresa May, warned that public spending cuts would be needed alongside tax cuts to get on an economic even keel.

‘I think we have got to get a balance right between restraining public spending and increasing taxes and we’re going to have to do both,’ he told Times Radio.

‘Anybody who says that the challenge can be met only by increases in taxation, or only by cuts in public spending is not being straight with people.’ 

Mr Johnson’s press secretary Allegra Stratton said today he and Rishi Sunak want the Budget to ‘unleash growth’ at ‘a challenging time for the public finances’. 

She declined to comment on the former ministers’ views, but asked whether she thought it was helpful timing just before the Budget, replied: ‘The more the merrier.’

The state of the economy and public finances at the time of the Office for Budget Responsibility forecasts in November were so bad that history books will have to be rewritten.

The 11 per cent drop in gross domestic product (GDP) – a measure of the size and health of the economy – was the worst since the 1709 Great Frost, the £394 billion deficit was a peacetime record and the national debt, at 105 per cent of GDP, was the highest since 1959-60.

But the prospect of lockdown lifting and the success of the vaccine rollout could see a strong bounceback in the growth forecasts.

Writing in the Daily Telegraph, Lord Hague, a former Tory leader,  said: ‘It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up.’

The former foreign secretary, Mr Sunak’s predecessor as MP for Richmond in Yorkshire, said those who opposed some form of tax rises in the current climate were buying into ‘dangerous illusions’.

But with rumours swirling about possible tax increases, the Prime Minister was keen to dismiss the idea of new green levies penalising consumers and motorists.

Mr Johnson told The Sun he planned to use the UK’s ambition of being carbon neutral by 2050 to ‘generate high quality, high skill, high wage jobs’ and not to slap higher taxes on carbon-intensive foods such as meat.

He also backed up suggestions that the Budget will see fuel duty frozen for the tenth year running. 

Yesterday Mr Johnson insisted the UK economy will prove ‘pessimists’ wrong with a surging recovery, amid claims the black hole in the government’s finances could be smaller than the £40billion previously feared.

The PM dropped a heavy hint that the forecasts accompanying the Budget will give Mr Sunak a boost as the vaccine rollout continues at breakneck speed.  

He said growth ‘could be much stronger than many of the pessimists have been saying over the last six months or so’.

The UK looks to have avoided a double-dip recession after growth stayed positive in the fourth quarter of last year

The UK looks to have avoided a double-dip recession after growth stayed positive in the fourth quarter of last year

The UK looks to have avoided a double-dip recession after growth stayed positive in the fourth quarter of last year 

Hammond blasts PM over plan for ‘grand infrastructure projects’ to boost the North 

Philip Hammond criticised Boris Johnson over his desire to lavish huge sums on huge projects to revitalise the north of England.

The PM has made his ‘levelling-up’ agenda a key focus of his post-Covid rebuilding plans, which includes projects designed to  stimulate growth in struggling regions. 

But former Chancellor Mr Hammond today said that it might be better simply to devolve power to local elected politicians.

He told Times Radio: ‘One of the ways to grow the UK economy faster, and with more resilience, is to get economic growth more evenly spread across this country. 

‘But that doesn’t necessarily mean investing in huge infrastructure projects. Many of the things that will drive higher economic growth, particularly in parts of the country in the North and the Midlands that have suffered slower growth over the last few decades, are around the way we deliver things like education and skills, and that may require a bit more money. 

‘But it’s about a lot more than just building grand infrastructure projects. 

‘It’s about thinking about the way we organise and deliver public services. 

‘And speaking for myself, and this is a personal view, I have become increasingly convinced that the key to doing this effectively, is to devolve power more effectively to the great metropolitan areas of our country, to allow them to organise public services in a way that reflects the needs of the societies the communities that they serve.’ 

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In a smattering of pre-Budget teasers, Treasury officials have said Mr Sunak will use his fiscal package on Wednesday to give a ‘significant chunk’ of a £300 million sports recovery package to cricket as fans prepare to return to stadiums this summer.

In preparation for Wednesday’s Budget, the Treasury on Monday evening revealed a series of funding packages targeting support at the beleaguered culture, sport and pub trades which have seen profits and activity knocked since social distancing was introduced at the start of the Covid outbreak last year.

Mr Sunak is expected to pump an extra £300million into the £1.57billion Culture Recovery Fund, as part of the measures.

National museums and cultural bodies will also receive £90 million to help keep them afloat until they can open their doors on May 17 at the earliest and £18.8 million will be provided for community cultural projects.

An additional £77 million will be given to the devolved administrations in Scotland, Wales and Northern Ireland to provide their culture groups with similar backing.

The Chancellor said: ‘Throughout the crisis we have done everything we can to support our world-renowned arts and cultural industries, and it’s only right that we continue to build on our historic package of support for the sector.

‘This industry is a significant driver of economic activity, employing more than 700,000 people in jobs across the UK, and I am committed to ensuring the arts are equipped to captivate audiences in the months and years to come.’

Tate director Maria Balshaw called the announcement a ‘vote of confidence’ in the country’s art organisations, while Creative Industries Federation chief Caroline Norbury said the cash would be a ‘vital part’ of enabling the sector to ‘bounce back’.

Mr Sunak will also use the Budget to deliver a £150 million Community Ownership Fund to allow pub goers to bid for up to £250,000 to save their favourite local.

The fund, due to open for applications in the summer, is designed to help community groups to take over struggling pubs or other community assets in their area in order to keep them going.

In signs of a shifting Labour position on tax rises, shadow chancellor Anneliese Dodds suggested the Opposition party could support an increase to corporation tax in the ‘long-term’.

The Chancellor is said to be considering raising corporation tax to as much as 25 per cent from 19 per cent, in a move that has caused splits within Labour.

Ms Dodds used a speech on Monday to argue that now is ‘not the time’ for tax rises but signalled she could support an increase in corporation tax in the future.

In an article for the Guardian, she went even further, saying: ‘There is a clear long-term case for rises in the rate of corporation tax – as well as action against loopholes – where the Conservatives have made us an international outlier for a decade.

‘If there were a sensible plan to raise the rate across this parliament, of course Labour would look at that carefully – but now is not the time for immediate tax rises.’

Office for National Statistics numbers published last month showed state debt was above £2.1trillion in January

Office for National Statistics numbers published last month showed state debt was above £2.1trillion in January

Office for National Statistics numbers published last month showed state debt was above £2.1trillion in January

The Office for National Statistics has said that over the whole of 2020 the economy dived by 9.9 per cent - the worst annual performance since the Great Frost devastated Europe in 1709

The Office for National Statistics has said that over the whole of 2020 the economy dived by 9.9 per cent - the worst annual performance since the Great Frost devastated Europe in 1709

The Office for National Statistics has said that over the whole of 2020 the economy dived by 9.9 per cent – the worst annual performance since the Great Frost devastated Europe in 1709

Labour leader Keir Starmer came under attack from hard Left elements in the party today, who urged him to listen to grassroots activists agitating for tax rises.   

The warning comes in a paper co-written by Jon Trickett and Ian Lavery, who served in Jeremy Corbyn’s top team but were jettisoned by Sir Keir last April.

The pair, together with ex-MP Laura Smith, said that Sir Keir is wrong to argue against corporation tax increases ahead of Wednesday’s Budget.

In their paper, the trio said that ‘even a Tory Chancellor wants to see increases in corporation tax’, with Rishi Sunak rumoured to be considering a rise as part of the effort to reduce the coronavirus deficit.

They argue: ‘We must remember that corporation tax is a tax on big business profits – not families.

‘Having spoken to many members of the Labour movement over the last year, it is becoming clearer that the party is becoming more disconnected from its movement and values.’

The trio – all supporters of Sir Keir’s predecessor Mr Corbyn – claim that trend is ‘reflected in the wider public’ because of Labour’s inability to build an opinion poll lead.

‘It would be reasonable to predict that the blunder and incompetence of the Prime Minister’s response to the Covid crisis, and his failure to implement adequate emergency measures such as test and trace, would lead to a big hit in the polls,’ they said.

A poll for MailOnline by Redfield & Wilton Strategies yesterday underlined the political challenges for Rishi Sunak as he puts the finishing touches to his Budget plans

A poll for MailOnline by Redfield & Wilton Strategies yesterday underlined the political challenges for Rishi Sunak as he puts the finishing touches to his Budget plans

A poll for MailOnline by Redfield & Wilton Strategies yesterday underlined the political challenges for Rishi Sunak as he puts the finishing touches to his Budget plans

‘This has not happened.’

They warned that ‘across the Labour movement there is concern that the Labour leadership is going to make the same mistake as it did in 2010, by accepting austerity as a core policy principle’.

That would be in ‘opposition to the feeling in the wider country that austerity failed Britain, leading it to be ill-equipped and unprepared for the pandemic’.

They warned there is a ‘disconnect between the party and the movement’ and ‘frustration at the command-and-control style of leadership’.

In his foreword to the No Holding Back report, Mr Trickett indicated that discontent on the left of the party was fuelled by the treatment of Mr Corbyn, who was stripped of the whip over his response to the equalities watchdog’s report on anti-Semitism.

‘There are many who feel that there is a determined effort to silence the voices of rank-and-file socialists in the Labour movement,’ Mr Trickett said.

‘Numerous examples of this tendency are being cited. There has been no policy-making party conference since Keir Starmer was elected as leader.

‘Many comrades were suspended for discussing resolutions in solidarity with Jeremy Corbyn.’

He added: ‘Many leaders from all sides of the political spectrum often make the mistake of cutting links with the movement that elected them. This can be a fatal error, for it is only the movement that can sustain and strengthen a leader.’

City fights back amid EU stock market onslaught with Rishi Sunak planning an overhaul in tomorrow’s Budget to make it more ‘agile’ to attract growing companies

Rishi Sunak is planning a shake-up of rules for the UK’s financial services industries amid attempts by the EU to woo, coerce and threaten them into moving to the continent.

The Chancellor is said to be preparing to use the Budget tomorrow to make the City more ‘agile’ in a bid to attract more firms to Britain in the post-Brexit era.

They want to make London better-placed to compete with New York, Frankfurt and Amsterdam with a new regime of regulatory freedom.

Alongside the Budget the Treasury is expected to public a review led by Lord Hill, the former EU financial services commissioner, the Financial Times reported.

It is expected to outline a raft of changes to make the city better set for future growth. 

It comes as Brussels takes an increasingly hardline over having a financial powerhouse on its doorstep.

Last week Bank of England governor Andrew Bailey lashed out at the EU today, suggesting it could be breaking the law by attempting to force City clearing houses to relocate to the eurozone in order to keep trading within the bloc.  

The Chancellor is said to be preparing to use the Budget tomorrow to make the City more 'agile' in a bid to attract more firms to Britain in the post-Brexit era.

The Chancellor is said to be preparing to use the Budget tomorrow to make the City more 'agile' in a bid to attract more firms to Britain in the post-Brexit era.

The Chancellor is said to be preparing to use the Budget tomorrow to make the City more ‘agile’ in a bid to attract more firms to Britain in the post-Brexit era.

Last month Amsterdam overtook London as Europe's biggest share trading hub

Last month Amsterdam overtook London as Europe's biggest share trading hub

 Last month Amsterdam overtook London as Europe’s biggest share trading hub

Last month Amsterdam overtook London as Europe’s biggest share trading hub. 

An average 9.2 billion euros worth of shares were traded daily on Euronext Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January – up more than fourfold from December.

By contrast volumes in London tumbled to 8.6 billion euros. 

The changes that Lord Hill will propose are reported to include relaxations on dual-class shares. These give additional voting rights to holders and are usually offered to company founders, their families and senior executives.

They are currently allowed on the main run of the London Stock Exchange but not in the FTSE 250 and 100 indexes.

It is also reported to suggest a change to the minimum level of the ‘free float’ for a company to list in London. Currently 25 per cent of shares have to be offered to the public for sale but it is claimed this level has put off investors who want it lowered.

The review is also expected to look at whether to attract more special purpose acquisition companies (spacs) – shell companies which list on a stock exchange and then look for a private company to buy and take public.

This allows large firms to be publicly listed without the need for an initial public offering of shares.

Speaking to the FT in a pre-budget interview last week Mr Sunak said: ‘We want to make sure this is an attractive place for people to raise capital.’

We want to remain at the cutting edge of that and make sure we’re still competitive.’

The UK and EU are attempting to thrash out a ‘memorandum of understanding’, setting out how the UK and EU will continue to trade in the key financial services sector.

One option is ‘equivalence’, where the UK and the EU agree to grant each other access to their markets if they deem their rules are closely enough aligned.

But while the UK’s financial sector has granted the EU equivalence in 17 areas, so business can carry on as usual, Europe has so far refused to reciprocate.

Mr Bailey last week said the row masked a resurgence of an EU ‘location policy’ designed to weaken a powerhouse of the UK economy. 

He addressed MPs on the Treasury Committee this afternoon, days after it was revealed Europe’s top banks are being asked to justify why they should not have to shift clearing of euro-denominated derivatives worth billions of euros from London to the EU. 

Alongside the Budget the Treasury is expected to public a review led by Lord Hill, the former EU financial services commissioner, the Financial Times reported.

Alongside the Budget the Treasury is expected to public a review led by Lord Hill, the former EU financial services commissioner, the Financial Times reported.

Alongside the Budget the Treasury is expected to public a review led by Lord Hill, the former EU financial services commissioner, the Financial Times reported.

December’s Brexit deal did not include an agreement on financial services including clearing house trade in euros on the London Stock Exchange that amounts to more than £150billion every day.  

Last November Rishi Sunak unilaterally allow financial services firms from the EU to do business in post-Brexit Britain and bemoaned the failure of the EU to strike a similar deal for the City since 2016.

Mr Bailey said the EU had first suggested a location policy when the euro currency was launched in 1999, but ‘Brexit has obviously been in a sense a stimulus to revive this debate’.

‘The issue of location policy is not a new one in that sense, we have been aware of it. What has been most notable in the last few days is how it seems to be coming to the surface. The timing isn’t that surprising given where we are.

‘It would be very controversial in my view because legislating extraterritorially is controversial anyway, and obviously of dubious legality frankly. 

Link hienalouca.com

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