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Sunak goes on £65bn business support spree

​With the Covid-19 vaccine programme rolling out ahead of schedule, Chancellor Rishi Sunak used his spring Budget to detail £65bn in spending plans to spark an investment-led economic recovery when pandemic restrictions are relaxed.

10th Mar 2021
Editor in Chief (interim) AccountingWEB
Columnist
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£65bn business stimulus package in 2021 spring Budget

Many of the business support measures Sunak introduced on 3 March could be categorised as general economic stimuli, such as the 130% “super deduction” to accelerate spending on plant and machinery. 

“Worth £25bn during the two years it is in place, this will be the biggest business tax cut in modern British history,” the Chancellor crowed. [Estimated cost £25bn]

Then there’s the £500m Help to Grow scheme to offer free online advice and discounted productivity-enhancing software to small businesses. And a new Infrastructure Bank that will be able to deploy up £12bn of equity and debt capital and a further £10bn in guarantees to support public-private projects. [£7.5bn cost estimated over five years]

Green support - and airport rescue

Digging further into the Budget Red Book unveiled a panoply of business support measures and giveaways to support and stimulate different sectors, including a £1bn Net Zero Innovation Portfolio to support green energy innovation schemes and even a six-month extension of the Airports and Ground Operations Supoort Scheme to underwrite their business rates liabilities during 2021-22. [Estimated cost £1bn]

Hospitality sector

The £5bn Restart grants were the most eye catching new support announcement, designed to help businesses reopen and get going again from April onwards. The grants range from £6,000 for non-essential retail businesses up to £18,000 for hospitality and leisure outlets that will have to wait longer to open.

With a further £300m earmarked to support sports-related industries and £400m set aside for pubs, including a further £150m to help communities set up trusts to keep local pubs, theatres and sports clubs operating, the teetotal Chancellor earned plaudits from UKHospitality chief executive Kate Nicholls for bringing some stability and peace “after a year of dreadful uncertainty” in her industry. [Estimated cost: £6bn approx]

Many pub campaigners were less impressed, expressing disappointment at the lack of information on the rent moratorium that is due to expire this month and pointing out the limitations of the temporary VAT rate concession.

Greene King boss Nick Mackenzie commented, “There’s a big cliff edge for the hospitality sector on rent that hasn’t been addressed at government level.” 

BBPA Chief Executive Emma McClarkin added said the extension of the temporary VAT relief was of “limited benefit”, because pubs will only be able to profit from reduced rates when they start opening up - mid-May at the earliest.

The Campaign for Pubs pointed out that VAT cuts on food and accommodation offered no help to traditional “wet pubs” that rely on alcohol sales, which remains subject to the standard rate of 20%.

£407bn bill over two years

Summarising the figures for MPs, the Chancellor estimated that the additional economic support measures included in his budget amounted to £65bn.

All told, with VAT reductions and tax deferrals, furlough and self-employed support grants included, Sunak is stumping up another £100bn to support businesses through the pandemic, bringing the cumulative total to just over £400bn in the 2020/21 and 2021/22 financial years. 

With so many hands reaching out to the Treasury for support, and a growing mountain of debt to fund, the Chancellor is negotiating the economic tightrope with some care. But throw the so far uncosted plans for 10 tax-free freeports into the pot alongside the jumble of stimuli announced on 3 March, it’s hard to escape the feeling that when it comes to helping UK businesses get back on their feet, Sunak might end up pouring a lot of his business largesse down the drain.

Additional reporting by Tom Ford

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