Rishi Sunak’s 2020 Budget Promises to Counter Coronavirus

Rishi Sunak’s 2020 Budget Promises to Counter Coronavirus

Chancellor Rishi Sunak promised a 'historic' investment in his first Budget – which took place on the March 11th 2020. With Coronavirus at the forefront of everybody’s mind, there was naturally a focus on the pandemic – and how the UK will mitigate its impact.

However, his statement went further, with the government determined to deliver on its promise to ‘level up’ the country. On the Tuesday before the Budget, Sunak said: “This is a Budget for people right across the country – no region will be left behind.”

But will people agree?

Read on, as we look at the major takeaways from the Budget – and how they will impact contractors across the UK.

The matter at hand: coronavirus

Stepping up to the despatch box, Chancellor Rishi Sunak tackled the all-consuming pandemic immediately.

"I want to get straight to the issue most on everyone’s mind – coronavirus Covid-19,” he began. “I know how worried people are. Worried about their health, the health of their loved ones, their jobs, their income, their businesses, their financial security.

“And I know they get even more worried when they turn on their TVs and hear talk of markets collapsing and recessions coming. People want to know what’s happening, and what can be done to fix it."

So, what can be done?

The UK economy is set to face a “temporary disruption” – which will undoubtably impact contractors – but the government has vowed to mitigate the shock with a £30bn stimulus package.

“We will rise to this moment,” he told MPs. “We will get through this together. This Budget delivers security today, but lays the foundations for prosperity tomorrow.”

The £30bn stimulus package will be divided up into different areas, with £18bn set aside to support the economy this year. Key areas to note are:

·      Sick pay

For anyone self-isolating due to the virus, statutory sick pay will be available – with the government set to pick up the tab. £2bn is in the pot for statutory sick pay and will cover up to 14 days to small & medium-sized businesses.

However, Tim Roache, general secretary of the GMB union, argues that this isn’t enough.

“There's nowhere near enough in the Budget to help working people who have to self-isolate," he argued. "Statutory sick pay is £18 per day, no one can live on that, and that's what the government seem to expect the 20% of the population who may have to self-isolate to do.”

·      NHS

A £5bn emergency response fund has been pledged for the National Health Service too, with however many “millions or billions” needed to deal with coronavirus. “Whatever it takes, whatever it costs, we stand behind our NHS,” Sunak stated.

With the measures for sick pay and the NHS combined, these measures represent a £7bn boost for self-employed, businesses and vulnerable people.

·      Loan scheme

£1.2m in loans will be available to small and medium sized businesses, as part of a new coronavirus loan scheme. "The government will offer a generous guarantee on those loans, covering up to 80% of losses, with no fees, so that banks can lend with confidence," said Sunak. "This will unlock up to £1bn of attractive working capital loans to support small businesses, with more as needed."

Bank of England reduces interest rates

In the wake of the coronavirus, the Bank of England cut interest rates by half a percentage point – dropping from 0.75% to 0.25%, which is a record low.

"The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove sharp and large, but should be temporary,” explained the Bank.

The financial fallout from the coronavirus are likely to impact smaller businesses first and foremost, but this reduction will help any contractors with long-term debts in place.

Although this news was broken before the Budget as part of an emergency response to the coronavirus, the Chancellor has confirmed that he is in constant contact with the Governor, Mark Carney – with a joint approach.

"Our responses have been carefully designed to be complementary and to have maximum impact, consistent with our independent responsibilities… The government’s response will use fiscal action to support public services, households and business."

Infrastructure boosted with 'record' spend

A record-breaking sum of £600bn has also been promised to make major improvements to the infrastructure over the five-year Parliament.

Set to be the "highest levels [of investment] in real terms since 1955", the injection of funds is set to make improvements to rail and road, affordable housing, broadband and research.

"We have listened and will now deliver on our promise to level up the UK, ensuring everyone has the same chances and opportunities in life, wherever they live.

"By investing historic amounts in British innovation and world-class infrastructure, we will rebalance opportunities and lay the foundations for a decade of growth for everybody."

For contractors on the go, this is good news. Better transport, twinned with 4G coverage across 95% of the country in the next five years, will be met by many who work remotely as a big win – if it can be delivered.

However, only time will tell whether those promises are delivered upon. "We've heard it all before,” warned shadow chancellor John McDonnell. "The Chancellor seems to have forgotten we have to dig ourselves out of the £192bn hole in our infrastructure spend created by his government.”

“Boris Johnson has a track record of boastful claims followed by non-delivery and it looks like he is running true to form."

Tax relief on diesel is scrapped

In a move that many industries expected – but also feared – a scheme which allows some sectors to pay less tax for diesel will be scrapped. To date, the rate of 11.1p/litre duty will end, with the full 57.7p/litre fuel tax coming into play.

"But the sectors using red diesel are some of the biggest contributors to our air quality problem - emitting nearly 10% of the most noxious gases polluting the air of cities like London," explained Sunak.

This news will come as a major blow to the farming industry, which relies heavily on red diesel for agricultural vehicles – and will undoubtably impact UK food production. The construction sector will also be hit.

However, it does open the door for greener substitutes to flourish. "It’s been a £2.4bn tax break for pollution that’s also hindered the development of cleaner alternatives,” Sunak continued. “So, I will abolish the tax relief for most sectors."

National Insurance contributions threshold increase

During the 2019 general election, Boris Johnson promised a “low tax for working people”. And that pledge has been reinforced by the chancellor, with the announcement that National Insurance Contributions will increase from £8,632 to £9,500.

According to Sunak, that’s a typical employee saving of £104 a year. Although, IFS estimates it’s closer to £85 a year. Either way, this is a small win for contractors – with a little extra in your pocket at the end of the year.

Expected news on IR35 doesn’t materialise

The proposed changes to IR35 have been a hot topic of late. The plan to extends the legislation to the private sector from April 2020 was previously announced by the government and was expected to be made concrete during the Budget. However, Sunak didn’t cover IR35, which has led many to think the change will go ahead as previously stated.

This shift was set to impact a further 170,000 private sector contractors on top of those already affected in the public sector. They could be forced to pay tax like an employee if they’re found to be essentially working as one. That includes having their working conditions, hours, locations and tasks determined by someone else – a boss.

If they’re found to be working as ‘disguised employees’, these contractors will be forced to pay tax through pay-as-you-earn and pay any unpaid tax. Unfortunately, paying tax like an employee won’t entitle them to statutory benefits though. So, they will still need to cover their own sick pay, pension and holidays.

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