Budget 2020

March 11, 2020 Charles Cummins

The Chancellor of the Exchequer delivered his Budget Statement to the House of Commons on Wednesday. Below is a summary of the announcements in his speech. A full list of the documents published alongside the Budget and a list of consultations announced can be found at the bottom of this post.

OBR figures and forecast

  2020 2021 2022 2023 2024
GDP growth (%) 1.1 1.8 1.5 1.3 1.4
Inflation CPI (%) 1.4 1.8 2.1 2.1 2.0
Inflation RPI (%) 2.2 2.7 3.1 3.0 2.9
  2020-21 2021-22 2022-23 2023-24 2024-25
Borrowing (£bn) 2.4 2.8 2.5 2.4 2.2
Deficit (%) -0.2 -0.1 -0.5 -0.7 -0.8
Debt (% of GDP) 77.4 75.0 75.4 75.6 75.2

Coronavirus:

The Chancellor began his Budget statement by announcing a series of measures to support public services and reduce the economic impact Coronavirus will have on individuals and businesses:

Support for the NHS

  • £5bn emergency support fund to provide the NHS with whatever extra resources they require during the crisis (“millions of pounds or billions of pounds, whatever it needs”)

Welfare support

  • £500m total boost to the welfare system
  • £500m Hardship Fund distributed to local authorities to support people in local areas
  • Statutory sick pay to be available for all those advised to self-isolate, whether showing symptoms or not
  • Those on contributory employment and support allowance (ESA) to claim from day one instead of day eight of sick leave
  • Temporary removal of the minimum income floor in universal credit and relaxation of the requirement for anyone to physically attend a job centre – moving appointments to online or on the phone

Support for Business

  • £7bn of measures to support businesses with the effects of Coronavirus
  • Government to refund statutory sick pay costs paid out by businesses with fewer than 250 employees, for up to 14 days sick pay as required for self-isolation
  • HMRC to scale up the Time to Pay service so businesses and the self-employed can defer tax payments over an agreed period of time, alongside a dedicated helpline with 2,000 staff
  • New temporary Coronavirus Business Interruption Loan Scheme under which banks will offer loans of up to £1.2m to SMEs, backed by an (up to) 80% guarantee by Government
  • One year abolition of business rates for shops, cinemas, restaurants and music venues with a rateable value of under £51,000.
  • 100% retail discount extended to any eligible retail, leisure or hospitality business with a rateable value below £51,000 for the next year
  • Fundamental review into the long term future of business rates launched, to conclude in time for the Autumn Budget
  • Any business currently eligible for small business rate relief to be provided with a £3,000 cash grant.

International support

  • £150m of funding available for IMF’s relief efforts.

Non-Coronavirus measures:

Personal taxes and the living wage

  • National Living Wage – To increase by 6.2% from £8.21 to £8.72 per hour from April 2020 as recommended by the Low Pay Commission
  • National Insurance – NI threshold to be increased from £8,632 to £9,500 from April 2020
  • Tampon tax – Scrapped from January 2021, so no VAT charged on women’s sanitary products
  • Tax avoidance – Extra funding for HMRC to secure £4.4bn of additional revenue

Excise Duties

  • Scottish food and drink industry – £1m of support to promote Scottish Food and Drink overseas and £10m of R&D support for distilleries to help the Scotch Whisky industry ‘go green’
  • Spirits – Planned increase in spirits duty cancelled for this year
  • Pubs – £5,000 business rate discount for one year to support pubs respond to coronavirus
  • Beer, cider and wine – Planned rise in beer, cider and wine duty cancelled
  • Fuel – Frozen for a further year

Business

  • Start up loans – £130m of new funding to extend start up loans
  • Scale up loans – £200m for the British Business Bank to invest in scale ups
  • Life sciences – £200m for life sciences
  • Growth Hubs – £10m to increase the Growth Hub capacity
  • British Library support – £13m to expand the British Library’s network of Business and Intellectual Property Centres to 21 cities and 18 surrounding local library networks across England
  • UK Export Finance –  £5bn of new export loans for business – making permanent the additional £2bn of funding provided to UKEF at the 2018 Budget, providing a new £2bn lending facility for projects supporting clean growth, and a further £1bn to support overseas buyers of UK defence and security goods and services
  • Trade Envoys – Dedicated trade envoys representing the North, Midlands, Wales and West of England in embassies around the world
  • Entrepreneurs’ Relief – Lifetime limit of Entrepreneurs Relief reduced from £10m to £1m
  • R&D relief – Research & Development Expenditure Credit increased from 12% to 13% from 1st April 2020
  • Structures and Buildings Allowance – Increased from 2% to 3%
  • Employment allowance – Increased by a third to £4,000

Science investment

  • R&D funding – Investment in R&D increased to £22bn per year, the highest in nearly 40 years as a percentage of GDP. Funding to grow by 15% next year, the fastest year-on-year growth on record. Detailed allocation of investments to be set out at the Spending Review
  • Science Institute – £1.4bn invested in the Science Institute at Weybridge
  • Future technologies – £900m invested in nuclear fusion, space and electric vehicles
  • UK Advanced Research Projects Agency – £800m invested in a new blue skies funding agency modelled on the US ARPA model
  • UK-wide research – £400m of incremental funding invested into high quality research, with much going to universities spread around the UK

The Environment and Energy

  • Climate Change Levy – Frozen on electricity from April 2022, and raised on gas
  • Climate Change Agreements Scheme – Extended for a further two years to support most energy intensive industries transition to net zero
  • Plastic Packaging Tax – manufacturers and importers to be charged £200 per tonne of packaging made from less than 30% recycled plastic from April 2022, increasing the use of recycled plastic packaging by 40%
  • Red Diesel – Tax relief abolished for most sectors using red diesel for two years, except for agriculture, rail, domestic heating and fishing. Other sectors to be consulted over the summer
  • Energy Innovation Programme – R&D investment more than doubled to £1bn
  • Nitrogen Dioxide – £300m invested to tackle nitrogen dioxide emissions in towns and cities
  • Electric Vehicle Charging – £500m invested to support the roll out of new rapid electric vehicle charging hubs
  • Flood damage – £120m available immediately to repair all defences damaged in winter floods, and £200m provided to local communities where there has been repeated funding, to build their local resilience
  • Nature for Climate Fund – £640m for a new Nature for Climate Fund to protect, restore and expand habitats such as woodlands and peat bogs to capture carbon
  • Carbon Capture and Storage – At least £800m invested in two or more new Carbon Capture and Storage clusters by 2030

Infrastructure

  • Total capital investment – The Government will invest more than £600bn over the next five years, details of which will be announced at the Spending Review
  • Devolved Governments – £640m provided to the Scottish Government, £360m for the Welsh Government and £210m for the Northern Ireland Executive
  • City and Growth deals – £242m of funding for new City and Growth Deals
  • English devolution – New West Yorkshire devolution deal, with directly elected mayor. All seven metro mayors to receive London-style funding settlements worth £4.2bn in addition to the Transforming Cities Fund which will invest over £1bn in local transport in 12 further cities including Stoke, Preston, Derby, Nottingham and Southampton
  • Telecoms – £5bn to get gigabit capable broadband into the hardest to reach places and £510m of new investment into the shared rural phone network
  • Rail – Committed to fund the Manchester to Leeds leg of Northern Powerhouse Rail, funding for a new station at Cambridge South and the Midlands Rail Hub, funding for Darlington Station to move to the next stage of development, and funding to make 12 train stations more accessible
  • Roads – Biggest ever investment in strategic roads and motorway, over £27bn of tarmac, a new £2.5bn pothole fund for the next five years, and funding for the A303 around Stonehenge

Education

  • Maths – Every region in the country provided with funding for specialist 16-19 maths schools
  • Arts – £25,000 per year on average for each secondary school to invest in arts activities
  • Sport – £30m a year to improve PE teaching and £8m for the Football Foundation’s scheme to build new pitches for around 300,000 people to play on
  • Family services – £2.5m provided to invest in research into how best to integrate family services including Family Hubs
  • Further Education – £1.5bn of new capital over five years to improve the condition of the FE estate
  • VAT on e-publications – Abolition of VAT on digital books, magazines, newspapers and academic journals, the so-called ‘Reading Tax’

Housing and Planning

  • Affordable Homes Programme – £12bn multi-year settlement for the Affordable Homes Programme
  • Social Housing – Interest rates on lending for social housing cut by 1%
  • Housing Infrastructure Fund – £1.1bn of allocations made from the Housing Infrastructure Fund to build nearly 70,000 homes in areas of high demand
  • Brownfield Sites – £400m for metro mayors to build on Brownfield sites, adding that the Housing Secretary will set out comprehensive reforms to the planning system on 12th March
  • Rough sleeping – £650m to help rough sleepers into permanent accommodation, buying up to 6,000 new places for people to live
  • Stamp Duty – 2% stamp duty surcharge for non-UK residents to be introduced from 1st April 2021
  • Grenfell Tower legacy – £1bn Building Safety Fund announced to remove all unsafe combustible cladding from every private and social residential building above 18m high

Healthcare

  • NHS funding – £6bn of new funding in this Parliament to support the NHS, delivering 50,000 more nurses, 50 million new GP appointments and work starting on 40 new hospitals
  • Mental health – £10m donation to the Armed Forces Covenant Fund Trust to assist veterans’ mental health
  • Doctors’ pensions – taper threshold increased by £90,000, to remove anyone with income below £200,000 per year, taking 98% of consultants and 96% of GPs out the taper altogether. Minimum annual allowance reduced to £4,000 only impacting those with incomes above £300,000

Budget Publications

Consultations launched