The tension and expectation surrounding the budget this year was high. It is probably fair to say that it was in the running for the most important announcement for businesses for a long time and certainly the most unusual one for decades. Now the smoke has cleared, it is a good time for a quick round-up of what happened.
Attempting to protect jobs and livelihoods
This was at the heart of the budget this year and with good reason. The pandemic has and probably will continue to affect jobs and the livelihoods of millions, so it was no surprise they were a prominent feature. The expected peak of av6.6% rise in unemployment in Q4 this year may not be as bad as some feared, but it is still a very significant increase. Unusual times indeed, and a staggering £407 billion will have been spent on Covid support by the end of this budgetary period.
The headline for job support has to go to the extension of the furlough scheme, which is now available until 30th September. The rider, though, was that employers would be asked to contribute 10% in July and August and 20% in September. Hopefully, this will result in companies having the resilience to open fully again and keep staff. If it doesn’t, we could see an increase in job seekers as businesses turn to redundancy as costs increase. Critics of the scheme have always felt it contributed to kicking the can of redundancy down the road rather than saving jobs.
SEISS grants were available again but with additional conditions. The surprise here for some was that the eligibility was extended to include many newly self-employed people.
For those looking to increase staff, there was a welcome increase to £3,000 of the current grant to offset the cost of a new apprentice. £7 million was allocated to the support of portable apprenticeships, but we will need to wait and see how this will be applied. A further apparent commitment to the continued employment opportunities for young people, traineeships of 6 weeks to 12 months will potentially attract a £1000 funding boost.
Hospitality and retail are still high on the agenda as some of the hardest-hit sectors. There is no doubt that the road to full service will be arduous in the hospitality space, but grants of up to £18,000 were announced with a further grant of up to £6000 to support non-essential retail. Without these grants, we would almost certainly see larger losses of jobs and businesses in the coming months. Traffic will hopefully return to the high street and drinkers and diners to the pubs and restaurants sooner rather than later.
While there was no concession to the so-called ‘Forgotten’ directors of small business who feel they have been unfairly excluded from support, there was an announcement of a new, partially guaranteed, Recovery loan Scheme (RLS). The RLS is to be available on loans of £25,000 to £10 million, and the money can be used for a wide range of reasons, including expansion and investment. The critics of this new scheme are pointing out that the loans seem to only actually be available to businesses that would already qualify for a loan. This could mean that the businesses that need it most, those who have suffered financial hardship due to the pandemic, could be excluded from the very thing created to help them. Again, details are still a little thin on the ground and whether this will save businesses and/or create jobs is still all speculation.
Business Rates Relief (BRR) was extended for eligible retail, hospitality and leisure. Again, this should help with expenditure while business recovers.
There could well be a knock-on effect in salaries from the long-expected tax threshold freeze. Sometimes known as a creeping band tax, the freeze on thresholds results in more tax being due overtime if wages continue to rise. The relative value of salaries is, of course, subject to external factors such as the cost of living as well as tax. This could well prove to be a very unpopular choice as time passes. For someone earning £60,000pa, a frozen threshold would result in a relative increase in tax payment of over £1000 in 2025/26, assuming a steady pay rise.
Finally, the significant change everyone dreaded on Corporation tax did but also didn’t arrive. For many smaller businesses with profits of less than 50k, there will be little change, and for larger businesses, higher profits will attract a sliding scale of up to 25%. There could, however, be an unexpected bonus for employment in this. One route to reducing the hit in corporation tax could be to re-invest the money in expansion, leading to more job roles.
In the final analysis, this budget could have been a lot worse in the context of the situation. That said, despite the Chancellors grants and loans, there are still some very concerning times coming, particularly for the retail and leisure sectors. There will be a learning curve for the accountancy and finance areas and a few adjustments to be made for tax changes and other factors, but, for now, at least, the budget has come and gone and with thankfully fewer bangs than we all feared.