The 2020 budget was always going to be one to watch. It’s the first budget of the new government. The first budget to set out the Prime Minister’s vision for Britain now that we’ve left the European Union. The first budget for the country’s brand new chancellor, Rishi Sunak, less than a month into the role.
In another twist that nobody could’ve expected, this year’s budget took place amid growing economic uncertainty around coronavirus which has now been officially declared a pandemic by the World Health Organisation. On the morning of the budget, the Bank of England announced a cut in interest rates, responding to the ‘economic shock’.
In this somewhat extraordinary budget, beyond the politics, here are three key takeaways:
1. The response to Coronavirus
As expected, there was a significant focus on the impact of coronavirus, with a pledge of £30 billion in funding. While a significant amount of this money will go to the NHS to tackle the virus, further funding was also pledged to mitigate its economic impact.
There have been a number of warnings in recent weeks about what the virus could mean for those not eligible for sick pay. Those who are self-isolating will now be eligible for Statutory Sick Pay from day one. While those working in the ‘gig’ economy or people who are self-employed can claim benefits more quickly. The rules will also be relaxed on the requirement to attend the Job Centre in person - claimants can call or visit the website.
The chancellor pledged to remove the 'minimum income floor' for Universal Credit, meaning business owners claiming the benefit as a result of the virus will not have the amount lowered based on their previous earnings.
A number of new grants and tax relief measures for businesses were also introduced in the budget - you can read more information on these here.
More information on coronavirus can be found on the NHS website.
2. Measures to support households
The budget was certainly dominated by the government’s response to coronavirus, however, it’s important to highlight some of the other pledges made that could have an impact on household income.
Most notably, the threshold for National Insurance will be raised from £8,632 to £9,500. The Government says that this will save the average earner £104 per year.
There are to be further tax freezes and reductions, most notably the abolition of tax on sanitary products from 2021. Fuel duty will remain frozen for a tenth year, with duty on alcohol also frozen.
Those aged over 25 earning minimum wage (The National Living Wage) will see an increase to £8.72 from April. Note that the London Living Wage is set separately in November each year.
On benefits, there will be changes to Universal Credit, including an increase in the repayment period for advances. And most notably, the benefits freeze will be coming to an end in April. While this is a positive step, those on benefits still struggle to make ends meet and removing the cap will not fix this on its own.
A lack of income is pushing many people into debt, and there must be decisive action at a government level to ensure people are truly given the support they need.
3. Looking ahead to the future
“For a period, it's going to be tough. But I'm confident that our economic performance will recover” - the Chancellor stated as he made his announcement.
This budget was due to set out the Government’s vision for the UK’s future, in a pivotal year for the country with our departure from the EU. The current coronavirus epidemic undoubtedly shifted the focus of the budget, but it left some unanswered questions.
Many of the measures focus on shoring up the UK economy in the short term. That is necessary. But in the longer term, there is fear about the pressure on public services.
We saw a number of commitments to infrastructure spending, such as on roads. But with council budgets stretched and no promise of real reinvestment, there is a risk that more people will face financial worries.
As we look to the future, particularly now that we have left the EU, successive governments will need to implement long term spending plans that tackle poverty.
While there was a commitment to build 200,000 new affordable homes, there was no mention of new council houses which many MPs from across parties had been calling for. Housing is one of the biggest issues facing Londoners accessing our service. Last year, rent and council tax were the two forms of debt that we helped our clients with the most.
The current situation with coronavirus is evolving quickly. I am pleased to see positive steps being made by the Government to ensure that people are given some financial support during this exceptional period.
We are looking at ways of adapting our service to ensure we can continue to support thousands of Londoners with debt and money concerns. If you are struggling to make ends meet or have been financially impacted by coronavirus and think that you may be eligible for support under the new rules, please get in touch.
FREE HELPLINE: 0808 164 2480
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