The Chancellor of the Exchequer, Rishi Sunak, is expected to formally announce a furlough scheme extension in the Budget on the 3rd March 2021, following an interview with Sky News on the 28th February 2021. A fourth round of grants under the Self-Employment Income Support Scheme (SEISS), covering the period February - April 2021, is also expected to be announced in the Budget.
Furlough Scheme Extension
In his interview with Sky News, the Chancellor provided a strong hint that a furlough scheme extension and a further grant to the self-employed would be announced in the Budget. He said about the possibility of a furlough scheme extension that "there is more to come."
Mr Sunak added: "I said at the beginning of this crisis that I would do whatever it took to protect people, families and businesses through this crisis and I remain completely committed to that. The prime minister in the road map set out a path for us to recover and reopen and I want to support people and businesses along that path…I want to make sure people realise that we are going to be there to support them and if you look at our track record, we went big, we went early and there is more to come next week."
Nevertheless, as we highlighted in a recent article, several organisations, including the Chartered Institute of Personnel and Development (CIPD), have been calling for an announcement of an extension to the furlough scheme (formally known as the coronavirus job retention scheme) much earlier than in the Budget, in order to provide business with greater certainty as to continued support.
Possible Rise In Corporation Tax
As well as a furlough scheme extension, the Chancellor is also expected to announce an increase in taxes in order to plug a £43 billion budget black hole, with the Government having already borrowed £270 billion in the current financial year, and the public sector net debt having increased to £2.1 trillion (equivalent to 99.5% of the country's gross domestic product, a level last reached back in 1962, at a time when the UK was still recovering from the dislocation caused by world war 2).
Amongst the tax rises, it is speculated that corporation tax may rise from 19% to anywhere between 23% - 25%. Nevertheless, even at 23%-25%, the UK corporation tax rate would still be below the G7 group of industrial nations average, and according to the Guardian, "businesses have been told to expect more generous investment allowances and tax credits [in the Budget] to compensate for higher corporation tax."
In relation to the probable tax rises, the Chancellor told the Financial Times that there was a need to "level with people......There are some people who think you can ignore the problem. And, worse, there are some people who think there isn’t a problem at all. I don’t think that. We now have far more debt than we used to and because interest rates.....[are] exceptionally low, that means we remain exposed to changes in those rates."
Reaction To Prospect Of Furlough Scheme Extension And Tax Rises
The CIPD argue that the announcement of the furlough scheme extension is long overdue and should have been made earlier. They contend that: "The furlough scheme has been a lifeline for thousands of organisations, helping to protect jobs and keep businesses afloat. However, [given] this latest wave of the pandemic……businesses need certainty now on what support will be available to them in the months ahead. Our survey shows that many want the furlough scheme to extend beyond April, but the Chancellor has said that this won’t be reviewed until March at the earliest. Businesses cannot wait that long for certainty, they need a clear indication of Government support to June at least."
In relation to a potential corporation tax rise, Mel Stride, the chair of the Treasury Select Committee, believes that the rate could end up at around 23%. He argues that: "If we end up at 23pc or a bit under and still the most competitive in the G7, given it raises about £3bn per percentage point increase, when you are having to take tough decisions about where to go, it is inevitable I think the Government will go into that place."
