A Budget For Recovery or A Budget to Balance the Books?

Corporation tax, on the other hand, is fair game. Plans to cut the CT basic rate to 17% have already been abandoned. The dream for the UK, to become the Singapore of Europe, just “Fantasy Island”.

The next move for CT rates is up. It seems likely the Government will increase the tax rate to 20% this year. The move will generate an additional £3 billion pounds for the Treasury. Not much really, that’s about a three day burn rate, at current levels of spending.

This is no time to increase the overall tax burden.

Central bankers around the world are advocating a fiscal and monetary policy, which will “get us through” the pandemic. The Chancellor will present a budget for recovery, not a budget to balance the books.

Rishi Sunak’s major concern is unemployment. In the UK, at the end of January, almost two million are unemployed, the claimant count has risen to 2.5 million and over 4.5 million will be furloughed. The shock of a slowdown, brought on by tax rises, would accelerate the level of job losses to a totally unacceptable level, both politically and financially.

The good news

Boris Johnson’s timetable for recovery suggests even the badly hit hospitality sector could be in full recovery mode from the end of June. According to Andy Haldane Chief Economist, at the Bank of England. The UK economy is like "a coiled spring", set to release lots of financial energy.

“Consumer confidence will surge back, the economy will be firing on all cylinders. Success with the vaccination programme and an easing of lock down will assist the process.” he said.

British households have amassed an astonishing £250 billion of cash apparently. They will be ready to return to the restaurants and book a much-needed holiday. They may even take a trip to the cinema.

The Bank of England forecasts the economy will expand by 5% this year. The Saturday Economist GDP(O) models suggest the latest “road map” could mean growth is even higher, at around 6.5%. The recovery in the jobs market will be much faster than expected, especially in the hospitality and leisure sectors.

There will be time ahead for the Chancellor to make the move to balance the books. For the moment, more spending is on the agenda. An extension of the furlough scheme to the end of June its expected. Further relief in Stamp Duty will be included. The business rates holiday for the retail, hospitality and leisure sectors will be prolonged. The VAT cut for hospitality and tourism will continue. Further business loan support and grants for the self-employed could be added.

Tackling the joblessness

The unemployment level has increased by 400,000 claimants over the past year. The Chancellor may not be able to “save every business and save every job”. It must be right however, to continue support for jobs hit by the pandemic and the subsequent lockdown. This is especially true for pubs and restaurants, hotels and leisure, travel and tourism, arts and entertainment.

The structural challenges for the retail sector will present a greater challenge, as the move online accelerates. The Treasury may begrudge the concessions on business rates. Within the retail sector this is already a dwindling income stream. The Treasury is exploring options to tax online sales.

This will not redress the balance for the high street nor protect the local communities. It will generate revenue for the treasury funded by households, pushing up prices and inflation in the process. This is no time to impede the great success story of the slow down.

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