Chancellor Rishi Sunak has cancelled the planned Budget in the face of worsening coronavirus infection rates and increased restrictions, and is set to unveil a ‘winter economy plan’ in its place
November’s Budget was expected to reveal the Conservative government’s long-term tax and spending strategy for the remainder of the parliament
However, the impact of Covid-19 on the economy, which has seen the Treasury pump billions into the coronavirus job retention scheme (CJRS), business loans and other support, has meant this is not possible because of the need to focus on short-term measures to handle the crisis.
Sunak has already ruled out extending furlough payments, which end on 31 October.
Instead, the Chancellor announced on twitter that he will be launching a winter economy plan, which is designed to save as many jobs as possible, given fears that the ending of the CJRS will see mass redundancies by employers whose business have been forced to close or are only operating at very reduced capacity.
Likely measures will include wage subsidies for part-time workers, VAT cuts and more Covid-19 business loans.
One option believes to be under consideration is a UK version of a subsidy scheme similar to Germany’s ‘kurzarbeit’ for workers who return on a part-time basis. Under the German scheme, employers pay the wages of staff while they are at work and the state covers 80% of their wages when they are not.
Sunak’s decision not to have a Budget was described as ‘no surprise’ by Genevieve Morris, head of corporate tax at Blick Rothenberg.
Morris said: ‘It would have been difficult for the Chancellor to announce tax changes in the autumn which are aimed at recouping the costs of the pandemic, whilst the country is still in the grip of a second wave and many businesses and individuals will be looking at having to pay deferred income tax, corporation tax and VAT liabilities and start repayments on the CBILs in the first quarter of 2021.
‘What we need from the Chancellor now is a promise that there will not be overnight tax changes announced in the autumn, or reforms which put additional burden on individuals and businesses.
‘A promise from the Chancellor now will remove the ambiguity which is worrying people at the moment and at least provide some certainty over the next six months.’
This is the second time in a year that a Budget has been delayed. Sajid Javid, who was Sunak’s predecessor, was due to hold a Budget in November 2019, but the prospect of a general election and Brexit issues meant it did not happen.
However, a Budget must be held every year as it ushers in a finance bill, which sets out the government’s tax and spending priorities. This is why Sunak delivered his first Budget in March, shortly after taking up the role of Chancellor.
This November’s event was also expected to feature a four-year comprehensive spending review (CSR) which falls due as the last one was held in 2015. There will still be a review in the autumn, but this is now more likely to cover a one-year extension plan instead.