Economic recovery will take a long time, Sunak warns

BBC political editor Laura Kuenssberg says the Budget gives a lot on emergency pandemic support for the economy, but takes in the form of tax changes.

Million, billion trillion…

When the numbers get bigger and bigger, the words can start to sound the same.

But a billion is a thousand times bigger than a million. And a trillion is a thousand times bigger than a billion.

To put that into perspective, if a million seconds adds up to 11 and a half days, a billion seconds add up to 33 and a half years - and a trillion seconds? More than 33,000 years.

An awful lot, in other words. But in a modern economy we spend an awful lot.

If you take the total money spent on healthcare in the UK, it would, (according to the Office for National Statistics), take less than five years to spend £1tn.

Alternatively £1tn could buy you more than four million houses at the average UK property price, or fund more than 500 NASA missions to Mars.

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There has been a lot of give, and there will be a lot of take.

Business will, in time, pay billions more. More than a million people will have to start paying income tax, and a million extra will pay at a higher level.

The deeply strange circumstances of the pandemic have turned the party with a theoretical love of low taxes into a government that will crank them up significantly in practice.

"Honest Rishi Sunak", as he hopes to be represented, has chosen his determination to start dealing with the cost of Covid-19 over the Tories' traditional backing for low taxes.

Boxed in by election promises, he has chosen two huge future money raisers.

Despite those hikes, and the hundreds of billions spent on Covid-19, public spending overall is still set to contract.

Rishi Sunak has done much more than extend the emergency lifelines - the modern-day Conservatives will raise taxes to a proportion of national income not seen since the 1960s.

Even before the pandemic, the prime minister had little appetite to pare back public spending.

But the past year has ended any Tory dreams of a lean and low tax economy.

And with any flicker to the cost of borrowing, or an even more prolonged pandemic, what is already a grim picture for the country's books may become tougher still.

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Here's a summary of the key Budget announcements:

• Furlough to be extended at 80% of wages until September
• Support for the self-employed also extended until September with 600,000 more people now eligible.
• £20 a week universal credit top up continues for another 6 months
• Working Tax Credit claimants will get £500 one-off payment
• The UK economy shrank by 10% in 2020
• UK to borrow a peacetime record of £355bn this year.
• No changes to rates of income tax, national insurance or VAT
• Tax-free personal allowance to be frozen at £12,570 unitil 2026 after a rise this April 2021 - meaning pay rises could pull people into a higher rate of tax.
• Higher rate income tax threshold to be frozen at £50,270 from April 2021 levels to 2026
• Corporation tax on profits to rise from 19% to 25% in April 2023 for biggest companies
• Stamp duty holiday on house purchases in England and Northern Ireland extended to 30 June
• Tax breaks for firms to "unlock" £20bn worth of business investment
• Firms will be able "deduct" investment costs from tax bills, reducing taxable profits by 130%
• All alcohol duties to be frozen for second year running
• Fuel duty to be frozen for eleventh consecutive year
• £1bn fund to promote regeneration in a further 45 English towns

You can read full details of all the announcements here.

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The Budget is packed with policies that will affect your finances. Here are just some of the ways:

Paying the wages of those on furlough: The furlough scheme - which pays 80% of employees' wages for the hours they cannot work in the pandemic - has been extended until September.

Jabs, then jobs: The extra £1.65bn to help vaccinate every adult by the end of July should mean people can get back to work and the economy can start to recover.

Support for the self-employed: Support for the self-employed comes in the form of grants. From next month, claims can be made for a fourth grant worth 80% of three months' average trading profits, up to £7,500 in total. But changes to how the scheme works are coming.

Finding the deposit for a mortgage: The chancellor confirmed that a government guarantee means first-time buyers should get a wider choice of mortgages that require a deposit of just 5% of the loan.

Read the full guide to find out more.

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One of the biggest headlines from the Budget is the extension of the furlough scheme until the end of September.

The chancellor confirmed the Job Retention Support scheme will continue as the UK goes through the final stages of the pandemic.

Almost five million people are still on furlough, which covers up to 80% of an employee's salary for the hours they can't work, up to a maximum of £2,500 per month.

As the economy opens up over the summer, employers who use the scheme will have to start paying into it. But workers will still receive up to 80% of their pay packet for hours they can't work.

Find out more about who is eligible for furlough.

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Paul Johnson, director of the Institute of Fiscal Studies think tank, believes the chancellor is taking a big risk in lifting the UK's corporation tax rate from 19% to 25%, starting in 2023.

“What we can be sure of is that Rishi Sunak has spent big again, extending some support right through 2021 at a cost of an additional £60bn or more," he says. "As a result borrowing is now forecast to again be above 10% of national income in the coming financial year.

But he adds: "Whether the big fiscal tightening planned for subsequent years will actually happen is less certain. It continues to depend on spending being lower than planned prior to the pandemic.

And it also depends on a large increase in corporation tax actually being implemented without additional measures to at least ease its long-run impact," Mr Johnson says.

"Make no mistake, this proposed increase in the main rate of corporation tax is a big reversal of decades of policy direction and a significant risk. For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high."

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The chancellor announced that two further grants will be offered to self-employed people struggling to work because of coronavirus.

An estimated 600,000 newly self-employed workers will be able to claim the support for the first time, using their 2019-2020 tax return.

They missed out on the earlier income support grants because they couldn't prove their self-employed status.

Those most affected by the pandemic will be able to claim up to 80% of their average trading profits, subject to a maximum cap.

However, self-employed people who pay themselves a salary and dividends through their own company are still not covered by the scheme.

Find out more about what help is available to the self-employed

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Entertainment and arts bodies have broadly welcomed the Budget announcements, while also demanding greater support and clarity.

The chancellor announced £390m to help arts venues in England, including theatres, museums and galleries, reopen.

The lion's share (£300m) will go into the pre-existing Culture Recovery Fund, and £90m will go to helping national museums and cultural bodies.

Elsewhere, Mr Sunak announced that the Film and TV Production Restart Scheme will be extended for six months until 31 December 2021.

Reacting to the Budget, Music Venue Trust boss Mark Davyd welcomed the extensions to furlough, support for the self-empolyed and the VAT cut on ticket sales.

"These measures are supportive of the next steps in the campaign to reopen every venue safely" he said.

Greg Parmley, CEO of LIVE, the UK's official industry body for live music, said he "warmly welcomed" the additional financial support, which he described as "due recognition from [the] government that the live music industry has been one of the hardest hit by the pandemic".

"The extension of the reduced 5% rate of VAT, in particular, will provide significant support to businesses who have had their revenue decimated over the past year," he said.

Read more here

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Rishi Sunak’s big day is in some ways a big gamble - a gamble that the swift roll-out of jabs will underpin the recovery and will do some of the heavy lifting in repairing public finances by boosting tax receipts.

But once the various existing support packages are tailed off in the coming months, there are two key unanswered questions.

Firstly, where will the support for job creation come from?

And where, asks the government’s own fiscal watchdog, is the provision for public services going forward, in particular for health?

From track and tracing, to dealing with possible new mutant strains, the challenge of dealing with the coronavirus doesn’t just go away.

The chancellor’s plans have him switching from giving to taking mode in the next few years, but the reality may be quite different.

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Rishi Sunak's media briefing came after his Budget speech today.

He began by saying he wants to be "honest about the problems we face", and said and it will take "a long time" to recover from the coronavirus pandemic.

He repeated the headline policies from the Budget:

• Continued support for the economy during the pandemic: the furlough scheme, help for the self-employed, business rates relief, and other grants for business
• A freeze in the income tax standard and higher rate thresholds, and, from 2023, a corporation tax increase to 25%
• Investment in infrastructure and skills, across the UK

In response to questions from journalists, Mr Sunak said:

• He thought the government had a responsibility to control public borrowing after the time
• He promised that no one's current take home pay will be affected by the freezing of the income tax thresholds
• Despite the proposed increase, the UK's corporation tax will be lower than in many of its competitors. Mr Sunak insisted the government was "on the side of businesses" but said the pandemic had made some tax rises necessary
• The Budget is intended to allow for flexibility in the government's roadmap for leaving lockdown in England

Ben Riley-Smith from the Daily Telegraph asks if the government will rule out rises in capital gains tax, and if the UK economy should open earlier if vaccination data says it's safe to do so.

Rishi Sunak says that he cannot comment on fiscal policy beyond what's been announced today in the budget. He says he wants the roadmap to reopening the country to be "cautious but irreversible", so once the economy is reopened, he doesn't want to have to do another lockdown.

And that, is the last question of the press conference.

Graham Hiscott of the Daily Mirror asks if the chancellor will extend support schemes if the timetable for easing restrictions slips.

He also asks why there is no pay rise for many public sector workers.

Rishi Sunak says the government purposely extended support schemes beyond the end of the current timetable to allow for any changes to the roadmap.

On public sector pay, he says wages are falling in the private sector but not in the public sector and that "I thought, for reasons of fairness, it was reasonable to take a more targeted approach to public sector pay".

He says people in the NHS will receive a pay rise and that those in the public sector, who earn less than £24,000, will see their pay will go up by 1%.

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George Parker from the FT asks about the levelling up programme.

He notes that 40 of the 45 areas that will get support are represented by Tory MPs, including the Chancellor's own constituency. Was fair criteria used he asks or did politics influence the decision?

Rishi Sunak says there is an index of economic need and it is transparently published.

He stresses that no area is excluded from bidding - the areas named today are those that have been identified as need extra support.

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The government’s spending watchdog believes that, between last March and the end of this month, the state will have borrowed a £355bn - a peacetime record.

Even as we move towards recovery next year, borrowing will remain very high.

Money is still required to fight coronavirus, and to supporting people and businesses through the economic shutdown.

And that shutdown doesn’t do much for the tax take.

If the economy does grow as the chancellor hopes then borrowing should then return pretty steadily to more normal levels.

But, as in so many other things, the future is very uncertain and depends on how quickly we escape the pandemic.

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The temporary £20 a week universal credit increase has been extended until the end of September, affecting more than 5.5 million households.

The boost was introduced in April 2020, to help struggling families during the pandemic. It was set to finish at the end of this month.

Working tax credit claimants will also get an equivalent increase for the next six months, through a one-off payment of £500.

Find out more about what the changes mean for you here.

Philip Aldrick from The Times asks what gives Mr Sunak confidence that tax rises in 2023 will not "choke off recovery".

Rishi Sunak says it is "not right" to compare the past ten years of public finances with what's happening now during a pandemic. He says the government wants businesses to invest, which is why the corporation tax increase only comes in two years, after the Office for Budget Responsibility expects the effects of coronavirus to have left the UK economy.

He says it is important to remember that corporation tax is a tax on profits, which means only successful companies will make significant contributions from it.