Budget 2021: UK economy to regain its pre-pandemic size by mid-2022, says Sunak

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 Summary

  • While announcing the UK budget 2021, British FM Rishi Sunak said that the economy would regain its pre-pandemic size by mid-2020.
  • Furlough scheme and stamp duty holiday were extended by five and three months, respectively.
  • Corporation tax raised to 25 per cent while VAT rate cut to 5 per cent for select industries.

 

While reading out his Spring Budget 2021 address, British finance minister Rishi Sunak said on Wednesday that the UK economy is likely to reach its pre-pandemic output level by the middle of next year, six months earlier than the last prediction.

However, the national gross domestic product (GDP) would still be around 3 per cent smaller in the next five years than it would otherwise had been if the pandemic outbreak did not take place, he added.

Sharing the latest Office for Budgetary Responsibility (OBR) forecasts, Sunak said that the British economy would grow by 4 per cent this year against the earlier forecast of 5.5 per cent made in November 2020. The national output would increase by 7.3 per cent in 2022 and 1.7 per cent in 2023.

The main highlights of the Budget 2021 are:

 

Also Read: Budget 2021: Rishi Sunak To Stretch Furlough Support Until September

 

Jobs and livelihood support

  • The coronavirus job retention scheme or the furlough support extended by a period of five months till the end of September. It was set to expire on 30 April.
  • Self-employment income support scheme has been extended to September 2021. With the government using the latest tax returns data, 600,000 more self-employed individuals would be able to claim the benefit.
  • A £20-pound weekly raise in the Universal Credit payout to get an extension of six months.
  • Stamp duty holiday got an extension of three months till 30 June, for home priced up to £500,000.
  • A new mortgage guarantee scheme introduced. It will help homebuyers get a mortgage up to £600,000 with just a 5 per cent deposit value.

Support to businesses

  • New cash grant worth cash grant worth up to £18,000 introduced for ailing sectors of accommodation, gyms, hospitality, leisure, and personal care across England.
  • Business rate relief extended to 750,000 businesses across leisure, hospitality, and retail sectors.
  • The VAT rate to continue at a lower rate of 5 per cent across accommodation, attractions, and hospitality until end of September. It will then be applicable at a rate of 12.5 per cent for the next six months. Standard rate would be applicable from 1 April, 2022.
  • Stamp duty holiday got an extension of three months till June, for homes priced up to £500,000 across England and Northern Ireland. Beginning this July, the nil duty band would reduce to £250,000 until September before it comes back to £125,000 in October this year.
  • New ‘restart grants’ worth cash grant worth up to £6,000 per premises introduced for non-essential retail and for up to £18,000 introduced for ailing sectors of accommodation, gyms, hospitality, leisure, and personal care across England.

 

Healthcare aid

  • A cash support of £1.65 billion provide towards Covid-19 vaccination rollout across England.
  • An additional provision of £28 million for raising the vaccine testing capacity and helping the clinical trials.
  • Test and support payment of £500 extended till summers in England.

 

 

Revenue generation

  • Corporation tax rate raised from 19 to 25 per cent but continues to remain the lowest among G7 nations.

 

Investment

  • Setting up of the UK infrastructure bank with an initial investment of £12 billion to drive the green industrial revolution.
  • Eight new free ports in England across East Midlands, Thames Felixstowe, Plymouth, Harwich, Liverpool City, Humber, Solent and Teesside. They are being set up as SEZs (special economic zones) to enable cheaper and faster business.
  • £375-million fund announced for investment in innovative companies.
  • £20-million fund launched for generating electricity from offshore wind.
  • £68-million support provided for building energy storage prototypes to lower cost of net zero.
  • £4 million provided for delivering a biomass feedstocks programme to raise production of green energy crops.

 

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