On 12 March 2021, the House of Lords is due to debate a government motion that “this House takes note of the economy in light of the budget statement”.
The Chancellor of the Exchequer Rishi Sunak delivered the budget on 3 March 2021. The Office for Budget Responsibility (OBR) described it as having three functions:
- to extend the coronavirus support package for households and businesses;
- to boost the recovery; and
- as the economy returns to normal, to take steps to “repair the damage” caused to the public finances.
On support for households and businesses, the chancellor extended many of the schemes and temporary changes so they would expire later than previously planned. These included the coronavirus job retention scheme, business grants and rate relief and the £20 a week uplift to universal credit. He also extended and widened the support package for self-employed people.
To aid the recovery, the Government announced a temporary capital allowance to promote corporate investment. It also provided additional funding for traineeships and apprenticeships.
The chancellor announced various steps to improve the public finances once the economy has recovered from the pandemic. For businesses, there will be an increase in corporation tax from April 2023. For individuals, a range of tax thresholds and allowances will be frozen from 2022/23. There were also measures to improve tax compliance and reduce fraud in welfare and coronavirus support systems. Finally, there were some further cuts to projected departmental spending.
The Government announced a range of other policies, including a new mortgage guarantee scheme, a new UK infrastructure bank and a widening of the Bank of England’s remit, when setting monetary policy, to account for environmental issues.
Alongside the budget, the OBR published its latest forecasts. It said the economy would return to its pre-pandemic level in mid-2022, six months earlier than previously forecast. Likewise, it reduced its forecast for peak unemployment. However, it predicted the virus would cause a permanent economic “scarring” effect of 3% of GDP. The public sector deficit and debt have also been severely impacted.
