The Budget 2021: Our reaction

Economy A variety of pound notes and coins
ViewsMarch 3rd, 2021

The Bevan Foundation team reacts to some of today’s announcements by the UK Chancellor of the Exchequer

The Chancellor’s much-trailed budget today is a missed opportunity. While there are a number of very welcome announcements – the retention of the furlough scheme and the £20 Universal Credit uplift amongst them – it is the bigger picture that is disappointing.

The Chancellor had a chance to set the UK economy on a different course – one where the inequalities between people and places so starkly exposed by the pandemic begin to narrow.  Instead the Chancellor announced sticking plasters – much-needed sticking plasters for sure – but not changes that will address the deep challenges we face.

Truly levelling-up means investing cash and effort in improving conditions at the very bottom – it means making sure the social security lifeline provides enough to get by, that people can afford to live in a decent home, and that work is fair.

Below is our rapid reaction to some of the headline-grabbing announcements – it is not a comprehensive analysis.

Cut in VAT 

Extending the reduced VAT rate of 5% to September will be welcomed by those businesses in the leisure and hospitality sector as will the ability to apply for grants of up to £18,000. Many businesses in this sector, especially those in smaller communities are small or microoperations – it is an understatement to say the last twelve months have been tough. However there has to be a note of caution.  

Through our work with small businesses during the first lockdown we saw that some were unaware of the support available – every effort  must be made to ensure these latest changes reach them. Also, leisure and hospitality businesses depend on customers having disposable income, yet the pandemic has seen a squeeze on living standards for manyWill there be enough people with cash to splash as the economy re-opens?  

Support for self-employment 

Support for the selfemployed has been a flashpoint throughout the pandemic, with many slipping through the cracks in support schemes. For selfemployed people who have seen turnover drop by 30% or more, the announcement of an 80% grant is encouraging. However, the Chancellor made it clear that this support will cease in Septemberpresenting cliff edge for some self-employed people. The eligibility of the newly self-employed for help will not compensate them for their exclusion from previous past rounds of support. 

Universal Credit  

The Chancellor’s announcement that the £20 uplift in Universal Credit will be retained will come as a relief for thousands of families across Wales. However the fact that the Chancellor has only extended this vital lifeline for six months raises some concerns.  

Unemployment is expected to peak in the second part of this year – precisely when the £20 uplift is due to end. Households facing job loss will experience a sharp shock when they most need the anchor of social security.  Many of those who lose their jobs may have already been on furlough, at 80% of earnings, meaning that they may have few savings to fall back on as they search for new work.  

Even with the £20 uplift, household finances are tight. Over a quarter of Welsh households with an income of less than £10,000 a year have had to borrow money in the pandemic and many are behind on bill payments. They will be hard hit when the uplift ends.  

Ending the uplift could also harm the economic recovery. People on the lowest incomes tend to spend locally and on essentials – taking that £20 a week away could hit high streets hard at a time when they need customer cash most.  

Housing 

While the budget boldly claimed to turn “generation rent into generation buy”, there was little to help renters that are unable or unwilling to buy.   Most renters have relatively low incomes and have been disproportionately affected by the pandemic. There was no sign of ending the damaging freeze to the Local Housing Allowance, while the commitments in respect of stamp duty in England generally benefit sellers rather than buyers.  

With many aspects of housing being devolved, the Welsh Government has an opportunity to fund genuinely affordable and decent quality housing.   

Compiled by the Bevan Foundation Team

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