Further to our recent article, the Chancellor of the Exchequer, Rishi Sunak, announced in his budget on the 3rd March 2021 that the furlough scheme would be extended until the 30th September 2021
Furlough Scheme Extended
The furlough scheme (known formally as the coronavirus job retention scheme (CJRS)) had been due to finish on the 30th April 2021. However, as we highlighted in a recent article, several organisations, including the Chartered Institute of Personnel and Development (CIPD), had been calling for an extension to the furlough scheme, and had also been seeking a formal announcement much earlier than in the Budget, in order to provide business with greater certainty as to continued support.
In arguing for an early announcement of a extension, the CIPD contended 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 a report, the CIPD had suggested an extension until the end of June 2021. However, in his budget, the Chancellor went much further than that, and extended the furlough scheme until the end of September 2021. In extending the furlough scheme, the Chancellor stated that: "For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked, until the scheme ends. As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September."
Further clarification however in relation to the extension of the furlough scheme emerged later on the Government website. The changes that will kick in from the 1st July 2021 are that employers must contribute 10% in July 2021, and 20% for August - September 2021. Moreover, in terms of eligibility from the 1st May 2021, an employee is not required to have been previously furloughed so long as they were on the employer’s UK payroll as at the 2nd March 2021.
Other Announcements Outside The Furlough Scheme
Outside of the extension to the furlough scheme, the Chancellor also announced that the Government would be providing a fourth round of grants under the Self-Employment Income Support Scheme (SEISS), covering the period February – April 2021, and a fifth and final grant covering the period May - July 2021.
The fourth grant under the SEISS will be set at 80% of 3 months average trading profits capped at £7,500.00.
In relation to the fifth grant under the SEISS, the level of support provided will be related to turnover. For those whose turnover has fallen by 30% or more, they will again receive an 80% grant capped at £7,500.00. However, for those whose turnover has fallen by less than 30%, they will receive a 30% grant. The Chancellor said in relation to those who would receive less support, that they had "less need of taxpayer support."
The Chancellor said in relation to the SEISS that: "When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed the 2019-20 tax return. But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom became self-employed last year can now claim the fourth and fifth grants."
Mr. Sunak also announced in the budget that corporation tax would be rising from 19% to 25% from April 2023 for companies with profits of a £250,000.00 or more (around 10% of all companies). For businesses with profits of £50,000.00 or less (around 70% of companies), they will pay what is known as a small profits rate at the existing 19%. For companies with profits of between £50,000.00 and £250,000.00 a tapered increase between 19% and 25% will apply.
Debt Burden
The Chancellor acknowledged that the legacy that will be left in dealing with the coronavirus crises, including the funding of the furlough scheme, will be a legacy of debt for a long time to come. He said: "Taking into account the significant support announced at the Spending Review 20, this means our total COVID support package, this year and next, is £352 billion. Once you include the measures announced at Spring Budget last year, including the step change in capital investment, total fiscal support from this Government over this year and next amounts to £407 billion."
Mr. Sunak added: "The OBR’s fiscal forecasts show that this year, we have borrowed a record amount: £355 billion. That’s 17% of our national income, the highest level of borrowing since World War Two. Next year,...borrowing is forecast to be £234 billion, 10.3% of GDP...Without corrective action, borrowing would continue at very high levels, leaving underlying debt rising indefinitely. Instead, because of the steps I am taking today, borrowing falls to 4.5% of GDP in 22-23, 3.5% in 23-24, then 2.9% and 2.8% in the following two years. And while underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023-24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast."
