Sunak's sequel takes the economic fight to the pandemic
A year ago Rishi Sunak’s debut Budget was overtaken by events – the pandemic’s terrifying first wave – almost before he sat back down on the green leather of the Commons front bench. Fast-forward 12 months and, with the economy reeling, his follow-up was rightly billed as the most important Budget in a generation.
Certainly the pressure was on for the Chancellor to announce positive measures for the economy, but he also had to inject confidence into the business community and strike the right tone for the country as we collectively drag ourselves out of the pandemic. By and large, I think Mr Sunak succeeded.
Yes, Corporation Tax is set to rise a bruising six percentage points to 25%. But helpfully businesses won’t have to deal with this for another two years. And besides, I don’t expect it to remain at that level for very long. An attractive corporate tax regime is a calling card for post-Brexit Britain, and a vital way for the country to attract foreign investment – so that rate could soon be pared back.
For many of us that’s pretty much where the Budget downside ended. The Chancellor set out to back the country, its businesses and the livelihoods of working people, and he basically delivered.
Vast support package
First of all, it was vital that the support needed for the economy to get through the pandemic should not fall off a cliff. And it won’t. Businesses and individuals are being protected via a series of ongoing financial measures that aren’t simply going to be turned off like a tap. That’s great news on a human level, as well as on a property market level.
The Government’s vast support package gives people confidence, breathing space and should help many get back on their feet after a year of pandemic restrictions drove many employers – and their employees – to breaking point. At the same time, it is good to see figures which suggest the economy isn’t going to stay in its Covid-inspired rut for long. The OBR is forecasting a return to pre-pandemic levels by the middle of 2022, with next year also seeing an annual growth rate of 7.3%. It was also hugely encouraging to see forecasts for unemployment coming in much lower than had been the case only a few months ago.
From Rent to Buy
The link between employment and house-buying activity is clear, and with more jobs being saved – and hopefully more being created as we emerge from the pandemic – this can only be good news for those looking to buy a home, as well as for those of us who finance and build them.
Confirmation that the Government would roll out a 95% mortgage guarantee scheme will help the industry in many ways. It will help first-time buyers – the industry’s seedbed – buy their own home and allow Generation Rent to become Generation Buy if they choose. It will also ease the transition from Help to Buy to a more normally functioning market. And the resulting uptick in demand will help those housebuilders who have struggled over the past months. Even the gradual tapering of the Stamp Duty holiday, with the tax not returning to its normal levels until October, reflected the fact it’s taking far longer to complete transactions during Covid than in ‘normal’ times.
All in all, I think the taxation situation could have been a lot worse.
And after 12 months of mostly grim news, it was refreshing to hear some unalloyed positives coming from the Government.
Yes, there is still some way to go before we are out of the woods. But the moves outlined by the Chancellor to support businesses across the country, to keep people in work and to support those who are struggling, suggest we are heading firmly in the right direction.