Round up of the March 2020 Budget
Posted by Liz Rees in Government and taxation category on 11 Mar 20
The recently appointed Chancellor of the Exchequer, Rishi Sunak, delivered his first budget today, March 11 2020, and below we highlight some of the key policy initiatives outlined in his speech.
Unsurprisingly, Sunak focused on measures to tackle the worrying social and economic effects of the coronavirus outbreak.
The key points were as follows:
- The Office for Budget Responsibility (OBR) has lowered its GDP growth forecast for 2020 to 1.1% from 1.4%. This could be subject to revision if the coronavirus crisis worsens.
- The growth estimate for 2021 is currently 1.8% and for 2022 it stands at 1.5%. Inflation is expected to be 1.4% this year.
- The chancellor announced £30bn of fiscal stimulus to tackle the health emergency, acknowledging the impact would be ‘significant but temporary’.
- Provision consists of extra resources for the NHS, immediate statutory sick pay for workers and suspension of business rates for small companies in hard-hit sectors.
- Public spending is to be ramped up on infrastructure, health, education and innovation. Infrastructure investment will amount to £600bn over the next 5 years whilst the NHS will receive an additional £6bn.
- Sunak believes the spending plans will improve long-term productivity by 2.5%. The OBR forecasts record employment, with wages expected to grow in every year of the 5-year forecast period.
- Following the end to Philip Hammond’s austerity policies, the OBR forecasts an increase in public borrowings from the £40bn predicted in the last budget to £54.8bn in 2020/21.
- On the environment, Sunak announced the government will spend £1bn on green transport solutions. Fuel duty remains frozen but there will be incentives for used of renewables.
- Red diesel subsidies, which benefit heavy polluters, are to be abolished for most sectors. A tax on plastic packaging will be introduced from April 2022.
- There were no changes to personal tax rates although the national Insurance threshold will raised to £9,500 from April as promised. Corporation tax is frozen at 19%.
- The amount that can be invested in a Junior ISA has been more than doubled, from £4,368 to £9,000. The pension lifetime allowance will increase in line with inflation (CPI) for 2020-21, rising to £1,073m. In a welcome change for high earners, the point at which tapering of the pensions annual allowance begins to kick in will increase by £90,000 so it only affects those earning more than £200,000.
The chancellor confirmed the government’s detailed departmental spending review, will be concluded in July and full details will then be published.
It is encouraging to see the big jump in the Junior ISA
allowance which provides a big incentive for parents to save for their children’s future. Furthermore, the step-up in capital spending is intended to lay the foundations for a more prosperous UK economy which could present opportunities for investors in UK shares.