Budget 2021 live: Sunak to freeze income tax thresholds and raise corporation tax to pay for Covid recovery





14:28

Sunak’s budget 2021 – Snap political verdict

It is common for chancellors to frontload the gain and backload the pain in budgets – using tax changes coming into force in future years to balance the books – but rarely, if ever, has it been done on a scale like this. This chart from the red book explains the big picture; for the 2021-22 financial year, this budget amounts to a giveaway of almost £60bn, but by 2024-25, the last year when the general election can be held, there’s a tax grab of almost £25bn.

Budget decisions

Budget decisions Photograph: Treasury

These measures also bury what was arguably George Osborne’s major legacy as chancellor; he dragged corporation tax down during his six years in office, but Rishi Sunak’s plans would largely reverse the Osborne cuts, with the rise generating an extra £16bn for the Treasury by the end of this parliament. This is much closer to Jeremy Corbyn’s policy for corporation tax at the 2019 election than Boris Johnson’s. Sunak’s plans would also raise an extra £6bn a year from income tax by the end of this parliament, through fiscal drag, with more people dragged into the higher rate. Disraeli once said the secret to a “sound Conservative government” was “Tory men and Whig measures”. Perhaps this is what they look like.

And yet, as Sir Keir Starmer argued in his response, a Labour budget would be different. There was nothing on social care, little on welfare (the row about cutting the £20-per-week uplift has just been postponed) and little that sounded truly transformational in terms of work and learning.

Sunak ended with an announcement about free ports intended to persuade the public there will be a Brexit dividend. This was the first budget since the UK properly left the ambit of the EU. During the 2016 referendum campaign Boris Johnson and Vote Leave said that, if the UK left the EU, VAT on fuel would go. Fuel duty has been frozen in this budget, but – like other Brexit promises – the pledge to scrap VAT on fuel seems to have vanished.

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OBR: tax burden will be highest since Roy Jenkins was chancellor

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Economic snap verdict: the Big Freeze, and modest growth from 2023

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source: theguardian.com