{"id":134583,"date":"2021-02-25T17:01:07","date_gmt":"2021-02-25T16:01:07","guid":{"rendered":"https:\/\/www.vuelio.com\/uk\/?p=134583"},"modified":"2021-02-25T17:01:07","modified_gmt":"2021-02-25T16:01:07","slug":"budget-2021-speculation-rebooting-the-economy-and-protecting-jobs","status":"publish","type":"post","link":"https:\/\/www.vuelio.com\/uk\/blog\/budget-2021-speculation-rebooting-the-economy-and-protecting-jobs\/","title":{"rendered":"Budget 2021 Speculation: rebooting the economy and protecting jobs"},"content":{"rendered":"

The economic outlook for 2021 is highly uncertain. Having started the new year with a renewed lockdown and an economy that shrank<\/a> 9.9% in 2020, a stronger than expected vaccine roll-out offers hope for a recovery in the months ahead. The upcoming Budget on 3 March will be critical in terms of shaping the strength and nature of that recovery from this Covid-induced crisis.<\/strong><\/p>\n

The Chancellor has been under pressure to address two main issues: he has immediate decisions to make over many aspects of the emergency support packages that are due to expire soon, as well as a need to start looking at how to pay for the \u00a3394bn the UK is estimated to have borrowed in the past year.<\/p>\n

Sunak warned<\/a> that the Government could not \u2018borrow our way out of any hole\u2019. Speaking in the Commons after the third lockdown was announced, he warned<\/a> that the public finances were ‘badly damaged and will need repair’. While the Chancellor has said that he wants to \u2018balance the books\u2019, the Government has also highlighted the \u2018end to austerity\u2019 for public spending. This suggests sizeable net tax rises will, at some point, be needed.<\/p>\n

Many economists have warned<\/a> the biggest risk to the economy in 2021 was that an \u2018over-thrifty\u2019 Chancellor would damage the recovery by tightening fiscal policy too early. According<\/a> to analysis by the Institute for Fiscal Studies (IFS) and Citi Research, next month\u2019s Budget should focus on securing the economic recovery from the Covid-19 pandemic, rather than trying to fix public finances. Similarly, former Chancellor Lord Darling has warned<\/a> Rishi Sunak against \u2018choking off\u2019 the Covid recovery with higher taxes.<\/p>\n

However, HM Treasury has announced it will publish a range of tax consultations three weeks after the Budget, a move some have suggested<\/a> will allow the Government to announce a \u2018good news\u2019 agenda focusing on economic recovery while delaying decisions on potential tax rises until later in the year. Moreover, because of the slow path to reopening the economy announced on 22 February, it has been reported<\/a> that the Chancellor has been forced to delay decisions on tax increases until he delivers a financial statement in the autumn.<\/p>\n

It seems<\/a> that Treasury officials are examining plans for major stimulus to the economy and are shelving plans for tax rises. Sources now say the Budget is likely to echo Sunak\u2019s autumn \u2018plan for jobs\u2019 and be dominated<\/a> by measures to protect jobs and shore up support for shuttered sectors.<\/p>\n

Outside of fixing public finances, as already mentioned, the Chancellor has decisions to take on the support measures introduced in response to the pandemic, which are set to expire shortly. Many, including<\/a> Paul Johnson at the IFS, have argued that these support measures should be extended for as long as restrictions are in place and phased out gradually as restrictions are phased out rather than coming to an abrupt halt. Budget decisions that need to be made include:<\/p>\n