An Emergency Budget?

Chris Sanger, EY’s Head of Tax Policy, comments:

“The first Budget of a new Parliament is often known as an Emergency Budget, designed to deliver the policies of the manifesto quickly and to deliver on the promises made to the electorate. This Budget might well be an Emergency Budget, but perhaps not in relation to the “Emergency” that the Chancellor was predicting when he took office just a month ago.

“The economic forecast of the Office for Budget Responsibility was somewhat overtaken by events such as the spread of Covid-19, the oil price wars, the share price fall and the Bank of England’s ½ percentage point cut on the morning of the Budget itself. Faced with this, the Treasury will have been relying on its own insight as to how the numbers will have been affected. 

“The new Chancellor, fresh in his position, has been facing a unique set of circumstances. But what we saw in the Budget was an example of the Treasury focusing on what it’s set up to do, namely to deliver policies that will steer the economy through the tumultuous times.

“What we saw was a spend Budget (to the tune of £200bn+ over the six years) with almost £30bn of tax rises, of which £32bn comes from freezing the corporate tax rate alone.  In a speech that was shorter on jokes and longer on catchphrases (“getting it done”), the Chancellor sought to give some good news to all, whether it was through freezing duties on all alcohol, freezing duty on fuel and delivering on the promises in the Manifesto on research and development tax credits, capital allowances and employment allowance.  Those who were looking for Entrepreneur’s Relief will be disappointed to see it cut today to £1m, but may be pleased that at least that much has been retained. 

“Some of the bigger questions have been deferred, including on wider reform of Business Rates. We saw a lot of immediate help for small businesses and many will be hoping that the consultation delivers more on this for the future.

“Not mentioned in the Budget speech itself, the Chancellor eased up slightly on Digital Services Tax, deferring when the tax is due, the same approach to that taken by his opposite number in France and potentially easing his on-going discussions with the US on trade.

“All in all, today’s Budget was focused on investing in the health of the nation – not just that of its people but also that of its businesses. A net spend of £175 billion may well temper the concerns of those facing the higher taxes included within the Red Book.”