What has just happened?

The UK Chancellor Rishi Sunak raised the likelihood of delaying an autumn Budget by requesting the production of official economic forecasts without committing to announcing any tax or spending plans.[1]

What does this mean?

Rishi Sunak was expected to deliver a budget in November that set a course for Boris Johnson’s government for the rest of the parliament.[2] The Chancellor has ruled out extending furlough payments and it is feared that the end of the coronavirus job retention scheme will see mass redundancies by employers whose businesses have been closed or are only operating at very reduced capacity.[3] In an attempt to halt job losses and business failures, the chancellor has scrapped his plans for an autumn budget amid government fears that a second wave of Covid-19 threatens Britain with a double-dip recession.[4] The UK Treasury stated that “now is not the right time” for the finance plans or to outline long-term plans.[5] Sunak’s decision means that the autumn budget has been delayed for a second year, although the Office for Budget Responsibility will still publish updated forecasts for the economy and the public finances in November.[6]

The government is likely to adopt measures to save the businesses from failing and to protect jobs through the winter. The measures include an extension of business loan schemes and VAT cuts.[7] Furthermore, the chancellor has been weighing up a German-style wage subsidy scheme to replace the furlough through the winter, which is due to end next month.[8] This would mean that the companies would pay staff for the time they are at work, while the Treasury would cover part of their wages for the time when they have no work. [9]

How does it impact the legal industry?

The government intended to recoup the mass expenditure on the furlough scheme, stamp duty holiday and ‘eat out to help out’ scheme through taxation. The government was set to increase Class 4 National Insurance from 9% to 12%, corporation tax from 19% to 24% and National Living Wage to £10.50 by 2024 for everyone over the age of 21, with the rate rising to £9.21 an hour from April 2021.[10] However, due to the pandemic, these rates will be unaffordable. Therefore, it is reasonable to assume that these changes will not be brought as the autumn budget has been delayed. It is believed that many businesses and individuals will be looking at having to pay deferred income tax, corporate tax and VAT liabilities.[11]

Despite the prospect of no Autumn Budget’s, the government has confirmed a spending review will take place to outline the general trends of Government spending in recent months.[12] The Winter Economy Plan revealed by the Chancellor will guide the country through what has been described as an “unquestionable difficult” winter by Prime Minister, Boris Johnson.[13] The plan will aim at financially supporting small businesses and the self-employed community during the second wave of coronavirus pandemic.

Written by Samriti Rudhra

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References:

[1] Chris Giles, ‘Sunak gives himself option of postponing autumn Budget’ (Financial Times, 11 September 2020).

[2] Phillip Inman, ‘As Coronavirus derails UK budget plans, what happens now?’ (The Guardian, 23 September 2020).

[3] ‘November Budget Cancelled’ (Accountancy Daily, 24 September 2020).

[4] Larry Elliott and Richard Partington, ‘Sunak axes budget in scramble for urgent measures to save jobs’ (The Gaurdian, 23 September 2020).

[5] Emer O’Toole, ‘Coronavirus: UK Autumn Budget scrapped as ‘now is not the right time’ (The National, 23 September 2020).

[6] Larry Elliott and Richard Partington, ‘Sunak axes budget in scramble for urgent measures to save jobs’ (The Gaurdian, 23 September 2020).

[7] Larry Elliott and Richard Partington, ‘Sunak axes budget in scramble for urgent measures to save jobs’ (The Gaurdian, 23 September 2020).

[8] Emer O’Toole, ‘Coronavirus: UK Autumn Budget scrapped as ‘now is not the right time’ (The National, 23 September 2020).

[9] Emer O’Toole, ‘Coronavirus: UK Autumn Budget scrapped as ‘now is not the right time’ (The National, 23 September 2020).

[10] ‘Autumn Budget 2020: What will be included?’ (TBL, 24 September 2020).

[11] Ryan Bembridge, ‘Autumn Budget cancelled’ (Property News, 24 September 2020).

[12] Malcom Foster, ‘Autumn Budget cancelled for 2020 due to COVID-19 crisis’ (TaxAssist Accountant, 27 September 2020).

[13] Malcom Foster, ‘Autumn Budget cancelled for 2020 due to COVID-19 crisis’ (TaxAssist Accountant, 27 September 2020).

Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.