This was a budget for drivers, drinkers and Bob the Builder. Booze and petrol duties were frozen, and there are billions more for roadbuilding and infrastructure projects. But coronavirus overshadows everything. The economy is going into an emergency stop – and Rishi Sunak has inflated a £30bn airbag he hopes will protect us.
When it comes to the great estates of tax raising that normally are the centrepiece of every budget – income tax, national insurance and VAT – there was almost nothing new.
There will be an NI cut worth £104 to most workers starting in April, but this was already well signalled in the Conservative election manifesto.
The rise in the threshold from £8,632 a year to £9,500 will be worth £104 to employees, as they will no longer have to pay 12% NI on an additional £868 of their income. The beneficiaries are often families and couples where one is a second earner – the government says 1.1 million people will come out of the NI net as a result of the cut.
On income tax, the personal allowance (the tax-free bit before you pay the 20% basic rate tax) stays at £12,500, while the 40% band begins at £50,000. About the only impact will be that more people fall into the 40% band as earnings rise. Slightly different rates apply in Scotland.
Sunak’s target was firmly middle England. If you have two cars on the drive (and are maybe thinking about going down the electric route before long), like to go down the pub and your partner works part-time, there was one bung after the next.
Fuel duty will be frozen again, which works out at a saving of about £40 a year for someone doing 10,000 miles a year. Petrol prices are already responding to the dramatic falls in the price of crude, with supermarkets cutting 2p a litre off prices this week.
There will be £500m for a big increase in charging points for electric cars, 4,000 more miles of road to drive them on and, if we are to believe Sunak, many fewer potholes.
Pubs and wine bars are jubilant. Beer duty is frozen, while the slashing of business rates is “great news for qualifying pubs”, said the Campaign for Real Ale.
Doctors, facing the greatest challenge in hospitals since the second world war, can work safe in the knowledge they will not be trapped by pension rules.
The doctor’s pension trap was complicated – it effectively meant that if they earned more than £110,000 a year, then a clawback of tax relief left them earning little when doing extra shifts. Now the limit has been raised to £200,000 – but that also means lots of other high earners will gain hugely. However, the chancellor has revised other rules, which mean very high earners on £300,000-plus lose nearly all their pension tax allowances.
But while looking after the doctors, Sunak dodged social care. We’ve been promised a government commitment to a cross-party solution. But this was one area where the chancellor didn’t “get it done”.
However, it is the government’s response to coronavirus that will be the test of Sunak’s first budget. Is the £30bn in fiscal measures and as much money as the NHS needs enough to treat the sick and vaccinate the economy against the worst of the virus? We must hope it works.
