Rishi Sunak has promised “security today and prosperity for tomorrow”. So what does the budget mean for broadband, transport, tax and more?
Bank of England cuts interest rates
Even before the new Chancellor Rishi Sunak had left Downing Street, the Bank of England announced a cut in interest rates. Policymakers reduced rates from 0.75% to 0.25%, meaning borrowing rates are back to the lowest level in history.
While this is good news for borrowers on variable rate mortgages, it’s bad news for savers, especially those approaching retirement, who may also have seen a fall in the value of their pension pots with the recent falls in stock markets.
See what rates you can get on your savings
Budget from a new Chancellor
Rishi Sunak had been Chancellor for just under a month when he stood at the Commons despatch box to deliver his first Budget.
When deciding his Budget, he has had to consider the potential economic impacts of coronavirus, global markets being rocked by the slump in oil prices, and the promises in the Conservative manifesto to invest in infrastructure and the NHS.
The Chancellor said his Budget would provide for “security today”, but he said it was also a plan for “prosperity tomorrow”.
Coronavirus impact on the economy
Coronavirus is expected to have a “significant impact” on the UK economy, but it will be temporary, the Chancellor said. He promised to deliver “whatever extra resources our NHS needs” to combat coronavirus. He has put aside a £5bn emergency response fund and said he would go further if needed.
He said that a fifth of the working-age population might need to be off work at any one time. He also said there has been a reduction of consumer spending as people stay home. Mr Sunak announced that Statutory Sick Pay will be available to everyone who is advised to self-isolate.
He also confirmed changes to Statutory Sick Pay, so that it will be paid from day one of the illness rather than day four, and faster access to benefits for the self-employed.
What does the budget mean for me?
The National Insurance threshold will be raised from £8,632 to £9,500 next month, Mr Sunak said. "That’s a tax cut for 31 million people, saving a typical employee up to £85," he announced.
The Chancellor has abolished the tampon tax. Women’s sanitary hygiene products will now be zero rated.
From 1 December, VAT will be abolished on digital publications including books, newspapers, magazines and academic journals.
Wine, beer and spirits
The planned increase in alcohol duty has been cancelled for beer, cider, spirits and wine. That means there will be no Budget increase on your favourite tipple.
Gas and electricity bills
The levy on electricity will be frozen from April 2022 and the levy on gas raised to help tackle the climate crisis. You can expect gas prices to rise proportionately.
Fuel Duty will remain frozen – so no Government increase on petrol prices.
Drivers of electric vehicles will also be getting a boost, with the pledge to provide £500 million over the next five years to support the rollout of a fast-charging network. This will ensure drivers will never be further than 30 miles from a rapid charging station.
A Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid, is included in the package.
The Chancellor also said he was committing to "the biggest ever investment in strategic roads and motorways", involving spending more than £27 billion. This includes improvements for the A303 that runs past Stonehenge, the A66 Trans-Pennine and upgrading the A46 Newark bypass. Plans to spend £2.5bn filling in 50 million potholes have been confirmed.
The Chancellor said ministers would give the independent Low Pay Commission a new formal target of the National Living Wage reaching two-thirds of median earnings by 2024, "as long as economic conditions allow".
Communities and the environment
Mr Sunak said he was making the provision of affordable and safe housing a priority. To do this he said he would extend the affordable homes programme with a new multi-year settlement of £12 billion.
He also confirmed £1.1bn from the Housing Infrastructure Fund “to build nearly 70,000 new homes in high-demand areas across the country”. Interest rates on lending for social housing will be cut by one percentage point, too.
A £1 billion building safety fund to ensure all unsafe combustible cladding is removed from buildings above 18 metres tall was also announced.
Flood-hit areas can benefit from £120 million, available immediately, to repair all defences damaged in the winter floods. The Chancellor also announced that he was providing £200 million directly to local communities to build flood resilience, and would double investment in flood defences over the next six years, to £5.2 billion.
Head of Home at Compare the Market
Commenting on the Government’s decision to invest in flood defence systems, Chris King, Head of Home at Compare the Market, commented: “This much-needed investment should help towards addressing the threat of flooding across the UK.
“In many of the nation’s high-risk areas, several of our existing defensives have failed to work, making the construction of an additional 2,000 flood and coastal defence schemes a needed requirement for those living in vulnerable areas.
“Prior to today’s Budget, our own research revealed two-thirds of homeowners agree the Government needs to be doing more to ensure high-risk homes have access to affordable insurance. Most worryingly, almost half of the homeowners we surveyed say they are unaware if they live in a high-risk flood zone.
“It is crucial that homeowners check if they live in a high-risk area and check the terms and conditions of their home insurance policies, to ensure they’re covered. It may also be worth shopping around to see if other providers can cover you at a cheaper price and with the level of cover suited to your situation.”
Broadband and mobile
The Budget provides £5 billion to get gigabit-capable broadband into the hardest-to-reach places and £510 million of new investment for the shared rural mobile phone network. According to the Chancellor, this means that 4G coverage will reach 95% of the country in the next five years.
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Every region in the country is being provided with funding for special 16-19 maths schools, an average of £25,000 per year for secondary schools to invest in arts activities, and £30 million a year to improve PE teaching.
The Government has promised that over the next five years, it will plant around 30,000 hectares of trees – that’s a forest larger than Birmingham – and restore 35,000 hectares of peatland.
Who is the new Chancellor?
Rishi Sunak was promoted to Chancellor following Sajid Javid’s resignation in February. He was previously Chief Secretary to the Treasury. He’s also the MP for ex-Tory Leader William Hague’s former seat of Richmond in Yorkshire, having won the seat in 2015. He was a keen supporter of the Leave campaign.
Budget impact on business
Eligible retail, leisure or hospitality business with a rateable value of below £51,000 will pay no business rates in this coming year. The Chancellor said the move would save a business up to £25,000. However, no help was announced for big chains.
There will also be £3,000 cash grants made available to smallest businesses that are already exempt from business rates.
And business rate discounts for pubs are to rise from £1,000 to £5,000 this year.
The Chancellor said that the Government will meet the cost of providing statutory sick pay to those off work "due to coronavirus" for businesses with fewer than 250 employees.
Coronavirus loan scheme
A coronavirus loan scheme that will offer loans of up to £1.2m to support small and medium-sized businesses was announced.
Mr Sunak said he will introduce a "plastics packaging tax", charging manufactures and importers £200 per tonne on packaging made of less than 30% of recycled plastic.
Corporation tax will not be cut this year and will remain at 19%.
The Chancellor said that the red diesel tax relief scheme would be abolished "for most sectors”. He added that exceptions would be agriculture and rail operators.
Entrepreneurs' Relief will be retained, but lifetime allowance will be reduced from £10m to £1m.