Among the UK’s new measures are a five-month extension of the job bailout, a continuation of an emergency increase in social benefits and an extension of a VAT cut for the healthcare industry. ‘hotel.
UK Finance Minister Rishi Sunak announced a costly extension of his emergency aid programs to see the UK economy through its current coronavirus lockdown, but announced a tax hike for many companies as he began to focus on fixing public finances.
In an annual budget speech on Wednesday, Sunak said the economy would return to pre-pandemic size in mid-2022, six months ahead of schedule, thanks to Europe’s fastest COVID-19 vaccination program .
But the economy will remain 3% smaller in five years than it would have been without the damage from the coronavirus crisis and more support is needed now as the country remains under coronavirus restrictions, he said. -he declares.
New support measures included a five-month extension of Sunak’s massive job rescue plan, increased support for self-employed workers, a continuation of an emergency increase in social benefits and an extension of a cut. value added tax (VAT) for the hotel sector.
A tax cut for home buyers has also been extended until the end of June.
“Firstly, we will continue to do whatever is necessary to support the people and British businesses during this time of crisis,” Sunak told Parliament.
“Second, once we are on the road to recovery, we will need to start correcting the public finances – and I want to be honest today about our plans to achieve that. And third, in today’s budget, we begin the work of building our future economy. “
Announcing the forecast from the Office of Fiscal Responsibility (OBR), Sunak said the economy is likely to grow 4% in 2021, slower than the 5.5% forecast made in November, reflecting the current lockdown that has started. in January.
Longer term, the OBR forecast gross domestic product (GDP) growth of 7.3%, 1.7% and 1.6% in 2022, 2023 and 2024 respectively. In November, the OBR had forecast growth of 6.6%, 2.3% and 1.7% for those years.
Sunak has vowed to do “whatever it takes” to guide the economy through what he hopes will be the final months of pandemic restrictions.
It has already racked up the UK’s highest borrowing rate after WWII, reaching around 17% of GDP in the 2020/21 fiscal year which is about to end. The borrowing rate is expected to fall to 10.3%, still historically high in 2021/22.
As a first step to raise taxes, Sunak announced that he would increase corporate tax from 19% to 25% from 2023, when the economy is expected to have passed the pandemic crisis.
“Even after this change, the UK will still have the lowest corporate tax rate in the G7 [Group of Seven bloc of nations] – lower than the United States, Canada, Italy, Japan, Germany and France, ”he said.
Companies with profits of 50,000 British pounds ($ 70,000) or less would pay a new rate for small profits, maintained at the current rate of 19%.
Sunak also said he would freeze the amount of money people can earn tax free and the higher tax rate threshold until 2026.