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Watch: Chancellor announces that corporation tax will increase from 19% to 25% in 2023
UK chancellor Rishi Sunak promised to do "whatever it takes" to protect the UK economy on Wednesday as he delivered his second budget as chancellor.
The chancellor set out a three-part plan to help the UK economy survive and recover from the COVID-19 crisis, while at the same time beginning to address Britain's battered public finances.
Sunak announced £65bn ($91bn) of additional COVID-19 support for the economy, taking total government spending since the crisis began to over £350bn.
He unveiled what he called the "biggest business tax cut in modern British history" — worth £25bn — to encourage companies to invest as economic recovery begins.
Sunak said COVID-19 had "fundamentally altered” life over the last year and repeated his commitment to keep supporting the economy.
“Much has changed but one thing has stayed the same — I said I would do whatever it takes. I have done and I will do so," the chancellor told parliament. "We will recover. This budget meets the moment, with a three-part plan to protect the jobs and livelihoods of the British people."
Key spending announcements to support the economy through the final months of the crisis included:
An extension of the furlough scheme until the end of September and new grants for the self-employed, estimated to cost around £10bn;
A six-month extension of the £20 uplift of universal credit benefits;
A new programme of state-backed loans to support businesses through the final months of lockdown. Businesses of any size can apply for "recovery loans" worth between £25,000 and £10m, with a government guarantee of 80%;
An extension of the businesses rates holidays until June and a 60% cut for the remainder of the year, worth £6bn in total;
A six-month extension to the VAT holiday for the hospitality and leisure sectors, followed by a tiered uplift. The tax breaks is worth £5bn;
£700m to help cultural institutions and sports return to normality;
£5bn in "restart" grants for High Street businesses to help shops and restaurants reopen;
Watch: Chancellor confirms extension of furlough scheme
Plans to help kickstart growth once restrictions end included:
A new "super deduction" on tax, which allows a company to claim 130% of any business investment off their tax bill. The tax break is worth £25bn and Sunak dubbed it "the biggest business tax cut in modern British history";
Doubling apprenticeship grants to £3,000 to get more young people into work;
£12bn of capital to underpin the creation of the new UK Infrastructure Bank based in Leeds, which will invest in long-term projects like renewable energy;
A new £375m investment pot dubbed Future Fund: Breakthrough that will take equity stakes in fast-growing startup;
Other spending announcements included:
£1.65bn more to fund the COVID-19 vaccine rollout programme and £55m for vaccine testing and development;
Sunak's announcement on Tuesday largely focused on support for the economy in the short-term but he was frank that tax rises will be needed to help repair the UK's public finances. He announced a looming increase in corporation tax for businesses and said the income tax allowance would be frozen.
Wednesday's budget was one of the most closely watched in years. Economists said the chancellor was facing a "balancing act" between supporting the economy and beginning to fix the UK's battered public finances. The government's annual budget deficit is on track to reach close to £400bn this year and national debt has risen past £2tn.
“It’s going to be the work of many governments over many decades to pay it back," Sunak said. “It would be irresponsible to allow our future borrowing and debt to rise unchecked."
The UK suffered the steepest recession of any developed nation in 2020 as a result of the COVID-19 crisis. GDP shrank by a record 10%.
Watch: What is a budget deficit and why does it matter?