The Chancellor of the Exchequer Rishi Sunak has today (March 3) vowed to ‘protect jobs and livelihoods’ as he unveiled the UK Government Budget for 2021.
Hailed as a budget that ‘meets the moment’ Mr Sunak announced a £65 billion three-point plan to provide support for jobs and businesses to forge a path of recovery from the pandemic.
Delivering the budget in Parliament Chancellor said: “This budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” he said.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s budget we begin the work of building our future economy.”
What does the UK budget mean for Scotland?
However, while the announcement was welcomed by Scottish Finance Secretary Kate Forbes, she warned that it ‘didn’t match Scotland’s ambition’.
Taking to Twitter to respond, she said: “Rishi Sunak’s budget was better late than never, but it didn’t match the Scotland’s ambition.
“The Scottish Government has already gone much further in our support for businesses and households with 100% rates relief, Council Tax frozen and a five-year capital investment plan.”
But just what exactly does the UK budget mean for Scotland?
Furlough and self-employed support extended
The Coronavirus Job Support Scheme has been extended until the end of September.
That means employees will continue to receive 80% of their salary for hours not worked. However, the Chancellor warned that employers will be expected contribute to the scheme as its end draws nearer.
Businesses will be asked to contribute 10% in July, rising to 20% in August and September.
The Self Employment Income Support scheme has also been extended until the end of September. This will allow 600,000 people who filed a tax return in 2019-20 able to claim for the first time.
The return of 95% mortgages
Those keen to make a move in 2021 can make the most of a new mortgage guarantee scheme.
This will allow buyers to secure a mortgage of up to £60,000 with a 5% deposit – something that has been highly unlikely for buyers since the start of the pandemic.
Universal credit uplift will continue
Mr Sunak also announced a six-month extension to the £20 weekly increase in Universal Credit payments brought in to offer additional support during the pandemic.
The weekly uplift is work more than £1,000 a year to those claiming the benefit.
The news follows fierce campaigning from opposition parties and charities for the increase to be kept in place for at least a year.
Working Tax Credit boost
People living in Scotland who receive Working Tax Credit will also receive a cash boost.
However, rather than a weekly uplift as with Universal Credit, they will receive a one-off payment of £500.
Income tax threshold frozen until 2026
The income tax personal allowance threshold, currently £12,500, will rise by £70 this year. However, Mr Sunak announced it will then be frozen until 2026.
This means that more people will be required to pay tax as wages increase.
It’s important to note that other rates and band changes do not fall under devolved powers and therefore don’t apply in Scotland.
Corporation tax rises
Some of the biggest companies across the country – approximately three in 10 firms – can expect a tax rise in the coming years. In two years’, in 2023, the rate will rise from 19% to 25%.
However, Mr Sunak stressed that despite the rise, the UK will “still have the lowest corporation tax rate in the G7.”
VAT reduction extended
The current reduced VAT rate for hospitality, accommodation and attractions will remain in place until the end of September.
VAT was reduced by 5% in response to the pandemic and the Chancellor stressed the support will go beyond the six-month extension when an interim rate of 12.5% will be in place for another six months.
VAT is expected to return to the standard rate in April next year – an almost £5 billion cut over the year.
Alcohol and fuel duty freeze
Planned increases in the duties for spirits – such as Scotch Whisky, wine, cider and beer, will be cancelled and alcohol duties frozen for the second year in a row. Mr Sunak pointed out this has only happened three times in two decades.
The planned increase on fuel duty has also been cancelled as the Chancellor said: “Right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel.”
Funds to the Scottish Government announced
The budget also confirmed an additional £2.4 billion for devolved administrations for 2021-22 which will be distributed through the Barnett formula.
The Scottish Government will receive an additional £1.2 billion through this arrangement.
Mr Sunak also announced that devolved administrations will also receive £1.4 billion of funding over the next year, outside of the Barnett formula.
