With Budget 2021, the Tories have become their dreaded nanny state. Here’s why that’s a good thing and how they’re becoming more liberal than they seem…
Chancellor Rishi Sunak, looking as dashing and dapper and sounding as posh as ever, delivered the 2021 Budget to a Downing Street press conference on Wednesday evening at 5pm. It’s a budget of considerable tax rises, an increase in minimum wage and business rates for retail, hospitality and leisure to be extended until June. You could say it was a very liberal budget with the Tories going against the low tax, small state economics that have made them such a notoriety in the Western world. They’re becoming the nanny state that they’ve constantly accused Labour of being, but what other choice do they have in a country with 1,783 Covid-related deaths in the past 7 days and 46,796 cases in 7 days and the worst recession in 300 years?
The Chancellor promised to do “whatever it takes” to get Britain through the pandemic. First of all, he’s extended the furlough scheme until September; using “full fiscal firepower” to protect jobs. Corporation tax will rise to 25% from 2023 while income tax thresholds will freeze (though smaller firms are spared). Keir Starmer claims the budget “papers over the cracks” of the UK’s economic problems, but that didn’t stop the Chancellor from unveiling a new restart grant for businesses. The stamp duty cut will continue at £250 until the end of June and the government will introduce small business tax rates.
The big and positive news for many workers will be that the minimum wage is to increase by £8.91 an hour from April and the government will continue paying 80% of employees’ wages for hours they cannot work. Employers will be asked to contribute 10% in July and 20% in August and September.
As for the self-employed, support will be extended until September and 600,000 more self-employed people will be eligible for help as access to grant is widened. There’s also going to be a £20 weekly uplift in Universal Credit worth £1,000 a year to be extended for another six months. Working Tax Credit claimants will get a £500 one-off payment.
Sunak has vowed to “protect jobs and livelihoods”, but the UK economy shrank by 10% in 2020 with economic forecast to return to pre-Covid levels by mid-2022 with growth predicted for 7.3% next year. 700,009 people have lost their jobs since the pandemic began and unemployment is expected to peak at 6.5% next year, lower than 11.9% previously predicted.
The UK borrowed a peacetime record of £355 billion this year - an unheard of feat for a Tory Government. They borrowed a total of £234 billion in 2021-22. Sunak hails a “swifter and more sustained” recovery, but there will be no changes in income tax, national insurance or VAT although higher rate income tax thresholds are to be frozen at £50,270 from April 2021 to 2026.
The newly-announced rise in Corporation Tax on company profits is above £250,000 - a rise from 19% to 25% in April 2023. Rates are to be kept at 19% for about 1.5 billion smaller companies with profits of less than £50,000. There’s no tax charged on sales of less than £500,000 and stamp duty holiday on house purchases in England and Northern Ireland has been extended to June 30th. Meanwhile inheritance tax thresholds, pension life time allowances and annual capital gains tax exemptions are to be frozen at 2020-2021 levels until 2025-26 and millions more are set to pay income tax by 2026.
Tax on company profits is to jump to 25% and the government will pump £1.65 billion to support the UK’s vaccine rollout and £50 million to boost the UK’s vaccine testing capability. They’ll also be £19 million to support domestic violence programmes, funding a network of respite rooms for homeless women which is a great cause. Victims of the 1960s Thalidomide scandal will receive £40 million of new funding and a lifetime support guarantee.
There will be £10 million to support armed forces veterans with mental health needs which I’m very glad about as funding for mental health services are lacking and in dire need of support. Nearly £400 million will be spent to help arts venues - who have taken a huge hit in this pandemic - including museums and galleries to reopen. Then there’s a £300 million recovery package for professional sport and £25 million for grassroots football. There’s also £1.2 million to help stage the delayed Women’s Euro football tournament in England in 2022.
Tax breaks for firms will “unlock” £20 million worth of business investment and firms will be able to “deduct” investment costs from tax bills, reducing taxable profit by 130%. Incentives for firms to take on apprentices will rise to £3,000 and there’s £126 million for traineeships. They’ll be a lower VAT rate for hospitality firms to be maintained at a 5% rate until September and an interim 12.5% rate will then apply for the following 6 months. Business rate holidays for firms in England are to continue until June with a 75% discount after that and there’s £5 billion in Restart grants for shops and other businesses in England forced to close with £6,000 per premises for non-essential outlets due to reopen in April.
£18,000 for gyms, personal care providers and other hospitality and leisure businesses with a New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas.
Contactless payments will rise to a whopping £100 later this year and relief has been extended for businesses on rate and VAT. Alcohol duties are to be frozen for a second year running with no extra tax on spirits, wine, cider and beer. Fuel duty is to be frozen for the 11th consecutive year and tobacco duties are to rise by inflation plus 2%.
A new UK Infrastructure Bank will be set up in Leeds. It will have £12 billion in capital with an aim of £40 billion worth of public and private projects plus £15 billion in green bonds, including for retail investors, to help finance the transition to net zero by 2050 (though critics say there is no “green revolution” in budget).
There will be £1.2 billion in funding for the Scottish government, £470 million for the Welsh government and £410 million for the Northern Ireland executive. 750 UK civil servants are to be relocated to a new Treasury campus in Darlington and there’s going to be a £1 billion fund to promote regeneration in a further 45 English towns including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich.
Finally, they’ll be a £150 million for community groups to take over pubs at risk of closure. And the first eight sites have been announced for Freeports in England: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
Now, there’s a lot of information to take in here, but the government are basically spending £407 billion on the 2021 budget. They’ve set peacetime records for borrowing and raised taxes to 25% - just 1% less than Jeremy Corbyn’s promised 26% tax rise. This will also be the first time the corporation tax has been raised since Denis Healey and the lacklustre Labour government of 1974 promised to squeeze the rich “until the pips squeak”.
It’s hard to believe this is the same Conservative government who, between 2010 and 2019, made more than £30 billion in spending reductions to welfare payments, housing subsidies and social services. The conservative ideology has always fundamentally been about minimising the role of government, promoting the interests of the individual and placing an emphasis on free market economics.
The kind of conservative economic policies we’re seeing now has echoes of when William Pitt the Younger increased various taxes in 1797 - on windows, servants, carriages and horses to finance national debt.
There’s a lot of similarities between Sunak and Pitt. They were both faced with a crisis - for Sunak, the Covid-19 pandemic. For Pitt, it was wars against Napoleon. Their countries were in debt and they both felt ensuring debt was under control was more important than avoiding immediate tax rises.
The UK has 4.2 million Covid cases and 124k deaths. It’s GDP shrank by 9.9% last year - the biggest decline since the Great Frost in 1709. How else are the government going to fund the nearly £12 billion spent on Covid vaccines? They’re not going to be able to without raising taxes. These are necessary to balance out the large scale spending and borrowing.
Does the budget suggest the Tories are becoming more liberal? In my opinion, the Tories have often been more liberal than they seem. They’ve had the country’s youngest-ever Prime Minister, David Cameron (43 when taking office), who strongly advocated the One-nation conservatism preached by Benjamin Disraeli in 1868. This suggested members of society have obligations towards each other. Think Cameron’s vision of a Big Society which envisioned a society run and supported by not solely the government, but the individuals, people and communities.
The Conservatives have had two female leaders and two of the current great offices of state - Chancellor and Home Secretary - are held by people of ethnic minorities. And, in 2013, they become the party to legalize same-sex marriage.
This 2021 budget merely seals the emergence of the modern, liberal conservative party peeking out from beneath this pandemic...
Meet Roshan Chandy
Freelance film critic, journalist and writer based in Nottingham, UK. Specialises in cinema.
Roshan's Top 5 Films of the Week
1. A Quiet Place: Part II (in cinemas)
2. Cruella (in cinemas)
3. After Love (in cinemas)
4. Dream Horse (in cinemas)
5. Frankie (in cinemas)
Follow Me on Twitter