The British government on Wednesday announced new measures to provide a lifeline to workers and businesses hit by the COVID-19 pandemic.
It also unveiled a corporate tax hike to reduce the government's record borrowing.
The help measures, announced by Chancellor of the Exchequer Rishi Sunak, include an extension to the furlough scheme and a new grant programme to help struggling hospitality and leisure businesses.
According to Sunak, the latest measures take the total amount spent by the government to support the British economy through the pandemic to more than £400 billion (€463 billion).
But the opposition said the budget fell short and "papered over the cracks rather than rebuilding the foundations" of the struggling economy.
The British economy has been ravaged by the COVID-19 pandemic and the measures imposed to curb its spread. Gross Domestic Product (GDP) in the UK shrunk by 9.9 per cent in 2020 — the country's worst performance in more than 300 years.
But the last three months of the year provided a glimmer of hope with the economy growing again — albeit by 1 per cent quarter on quarter. And, despite a third national lockdown being introduced in England in early January, the Bank of England projected last month that GDP should "recover rapidly towards pre-COVID levels over 2021".
It did warn however that the economic outlook "remains unusually uncertain" and that much depends on the evolution of the pandemic and the measures taken to combat it.
Long-term economic pain
Sunak told lawmakers in parliament that the Office for Budget Responsibility (OBR) expects the economy to grow by 4 per cent this year, 7.3 per cent next year and then below 2 per cent to the following three years.
Still, Sunak said, "while our prospects are now stronger, coronavirus has done and is still doing profound damage" and the OBR still expects that in five years time "our economy will be 3 per cent smaller than it would have been".
He also stressed that the pandemic pushed the country into borrowing a record £355 billion last year, which amounts to 17 per cent of the country's national income — the highest level of borrowing since World War II.
"Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely," Sunak said.
What was announced
Furlough scheme extended
The furlough scheme, which covers 80 per cent of workers' salary, is being extended from the end of July to the end of September.
Sunak announced that more than 600,000 people, mostly self-employed, will now become eligible.
According to the government, 11.2 million jobs have been covered by the scheme since the start of the pandemic.
Employers will meanwhile be asked to up their contribution towards the hours their staff do not work to 10 per cent in July and 20 per cent in August and September.
New grants for businesses
The government is to provide an additional £5 billion (€5.8 billion) in grants to firms in retail, hospitality, accommodation, leisure and personal care.
Prime Minister Boris Johnson unveiled the government's lockdown exit strategy late last month. Under the four-step plan, non-essential retail businesses, as well as restaurants and pubs with outdoor facilities and indoor leisure centres, will reopen on April 12.
Cinemas, theatres, hotels and sporting events will follow a month later. The last few restrictions on nightclubs, funerals and weddings are scheduled to be lifted on June 21.
The VAT rate for hospitality and tourism businesses will also remain reduced at 5 per cent for a further six months.
Sporting, cultural and arts organisations will meanwhile receive a further 700 million (€810 million) in support to help them reopen. Some of the money will also go toward supporting a UK-Ireland joint bid to host the 2030 Men's Football World Cup.
Support for the housing market
Sunak unveiled a mortgage guarantee scheme to help people with small deposits get on the housing ladder.
People wanting to buy a house worth up to £600,000 (€694,000) will need to provide a 5 per cent deposit with the government offering lenders the guarantee they need to provide the remaining 95 per cent.
The government believes the scheme will help to support the housing market and protect jobs and businesses across the housing supply chain, from housebuilders and estate agents, to tradespeople, DIY stores and removal firms.
Additionally, the government is extending the stamp duty holiday on properties worth up to £500,000 until the end of June.
Booster shot for the COVID-19 vaccine
The budget also included an additional £1.65 billion (€1.9 billion) for the COVID-19 roll-out.
The government plans for every adult in the UK to have been offered a dose of the vaccine by July 31.
Of that money, £33 million (€38 million) is earmarked to improve vaccine testing capabilities and the ability to respond to new variants and another £22 million (€25.5 million) to fund a world-first UK trial to test if different vaccines can be used together, or if a third dose can be effective.
To prevent public debt from continuing on its upwards path, Sunak unveiled several measures.
The personal tax allowance — the tax-free threshold for workers — will be increased as planned but will then remain at that level until 2026.
The corporate tax rate will meanwhile be increased to 25 per cent from 19 per cent in 2023 although companies with annual profits below £50,000 (€57,800) will stay at the current rate.
He also announced tax breaks for companies that invest over the next two years allowing them to reduce their tax bills by 130 per cent.
Sunak said these measures to shore up the government's fiscal situation should see borrowing fall from 10.3 per cent of GDP in 2021/2022 to 4.5 per cent of GDP the following year and 3.5 per cent in 2023/2024.
'A quick fix'
Keir Starmer, leader of the main opposition Labour party branded the budget as a "quick fix".
"We needed a budget to fix the foundation of our economy," Starmer said, "instead what we got was a budget that papered over the cracks."
He deplored that "the Chancellor barely mentioned inequality, let alone tried to address it", or that the budget included no plans "to fix the NHS and social care".
He welcomed the announcements on prolonged VAT cuts and business rate reliefs but argued they are overdue.
He also said that the government's plan to invest £12 billion (€13.4 billion) to finance a so-called green industrial revolution falls "way short" of what's needed to protect the environment and accelerate the economy's transition.