2020 Budget commentary
We were last able to use the term “expansionary Budget” when Geoffrey Howe was Chancellor of the Exchequer in the 1980’s.
There was no budget last year. The last one was in November 2018.
One of Mr Hammond’s measures had been to abolish a March budget. In his speech, Rishi Sunak the Chancellor of the Exchequer implicitly reserved the right to revisit some of his Budget 2020 assumptions and forecasts in an Autumn Statement later this year.
Leaving aside the emergency COVID-19 measures adding £30bn. to this year’s borrowing requirement, Mr Sunak’s key policy was for the Government to borrow an additional £175bn over the next 5 years to fund his plans.
The speech adopted manifesto pledges:
1. to let hard working families keep more of what they earn:
i) revising upwards the remit for the independent Low Pay Commission with the National Living Wage forecast to be £10.50 per hour by 2024;
ii) increase NI starting threshold to £9500: it continues to lag £3000 behind income tax personal allowance;
iii) some duty reliefs and Business Rates relief for pubs.
2. to back business to innovate, invest and trade:
i) lifetime limit for Entrepreneur’s Relief reduced from £10m. to £1m;
ii) improvements to R&D tax credits;
iii) Structure & Buildings allowance increased to 3%;
iv) Employment Allowance increased from £3000 to £4000.
3. to invest in science and research: various measures;
4. to deliver green growth and protect the environment: various measures;
5. to invest in new roads, railways, broadband and homes:
i) over £600bn. investment over next 5 years;
ii) of which £27bn. for roads. Sounds expensive for 20+ connections to ports and airports, 100+ junctions, 4000 miles of road: will Highways England rise to the challenge?
6. provision of record funding for NHS and public services:
a) Education – zero-rate digital publications from 1 December 2020;
i) more support for affordable homes;
ii) stamp duty surcharge for non-UK residents at a rate of 2% from April 2021;
iii) Building Safety Fund £1bn.
i) corporation tax reduction from 19% to 17% cancelled;
ii) pension contribution thresholds increased from 6 April 2020 in response to lobbying on behalf of NHS consultants receiving £110000 or more;
iii) 6bn. new funding over 5 years.
Some measures previously announced have effect from 6 April 2020:
a) IR35 rules apply to larger employers in the private sector using contractors;
b) digital sales tax at 2% despite US protests;
c) Capital Gains tax on sales of residential property due 30 days after sale, not 31 January following end of tax year;
d) VAT reverse charge for the construction industry starts 1 October 2020.
Some other things which did not get a mention:
– no developments to Making Tax Digital
– no changes to IHT or trusts.
Overall, the Budget speech was more elaborate than we were used to under Philip Hammond or George Osborne, hence perhaps comparisons with George Brown. The language used was journalistic reflecting possibly some direct input from the Prime Minister.
Although the case for large-scale investment is undisputed, the challenge is managing it. The Government will have to work hard to see that the money spent is converted into worthwhile long-term projects, within a decent timescale, and at a decent cost.
Regional re-development is similarly overdue: carrying it through will require consistent and dedicated political commitment on the part of Government in a fresh approach.
Please contact Nicholas Ridge CTA, for further information on any of the points set out in this Commentary.