2021 UK Budget Breakdown: Economic Recovery
On the 3rd of March, the Chancellor of the Exchequer, Rishi Sunak announced the government’s 2021 budget. This budget is comprised of five key components: Economic recovery, protecting jobs and livelihoods, strengthening the public finances, COVID19 relief and devolved nations. Over the coming days, we will be looking at each of these components individually. This post will look at the budgets plan for economic recovery.
A major part of this budget was its response to the economic impact that has been caused by the coronavirus pandemic, the resulting lockdown and public health measures. This response to the pandemic has had a large effect on the economy both in the UK and globally. This has led the government to create an economic recovery plan aiming to stimulate growth and strengthen our economy.
The impact of coronavirus on our economy
With the coronavirus pandemic being a presence in all our lives for over a year now the economic impact has been significant. Certain parts of the economy such as retail, hospitality and catering have been some of the hardest-hit affecting jobs, local investment, and the wider economy. As well as this, to meet the increased government spending to secure jobs and public health spending the government deficit and debt has ballooned. These factors have all contributed to an economic decline during 2021 and potentially remain as barriers to future economic growth.
The UK economy shrank by 10% in 2020
700,000 people have lost their job during the pandemic
The economy is projected to fully recover by halfway through 2022
UK government borrowing broke a peacetime record with £355bn borrowed in 2020
The government’s economic recovery plan
These are the major economic proposals set out by the government to help encourage economic growth during and after the recovery from the covid-19 pandemic:
Super-deduction to cut companies’ tax bill by 25p for every pound they invest in new equipment. This will be worth around £25 billion to UK companies over the two-year period and will help encourage economic growth
8 new English Freeports at East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
The £375 million UK-wide ‘Future Fund: Breakthrough’ to invest in highly innovative companies such as those working in life sciences, quantum computing, or clean tech.
A new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost.
£2.8 million to support a UK and Ireland bid to host the 2030 World Cup
Funding available to support future green power generation
Over £1 billion funding for a further 45 towns in England through the Towns Fund, supporting their long-term economic and social regeneration as well as their immediate recovery from the impacts of COVID-19.
£28 million to fund the Queen’s Platinum Jubilee celebrations in 2022, delivering a major celebration for the UK.
Plans for at least £15 billion of green gilt issuance in the coming financial year, to help finance critical projects to tackle climate change and other environmental challenges, fund important infrastructure investment, and create green jobs across the UK.
Collectively these measures amount to a major injection into the UK economy with an emphasis on encouraging investment for businesses. This can be seen in the investment of equipment in the super-deduction cuts as well as calls to invest in technological and greener alternatives to drive growth. Furthermore, measures such as the Queen's platinum jubilee celebrations and a joint world cup bid with the Republic of Ireland aim to boost economic confidence and spending. This is part of the overall message of the budget, of investment and spending in contrast to the austerity budgets of the coalition government between 2010 and 2015. These budgets which came in response to the economic crash of 2008 focused much more on deficit reduction, aiming to reduce government expenditure. A decade on and the current Conservative government looks as if it has turned its back on this approach to be instead in favour of encouraging economic growth through government spending.
Sam Ward, Policy & News Associate