Sunak unveils 'whatever it takes' Budget with £65bn in Covid help but tax rises to pay for it

He explained how the pandemic had “fundamentally altered” the country’s way of life, telling MPs: “Much has changed but one thing has stayed the same; I said I would do whatever it takes, I have done and I will do.”

Pledging to use the “full measure of our fiscal firepower” to protect jobs and livelihoods as Britain emerged from the lockdown, he announced a raft of extensions: five months for the furlough scheme; six months for the £20-a-week rise in Universal Credit; five months for the reduced VAT rate for the hospitality sector and a continuation of the business rates holiday in England until June with a 75% discount after that.

But Sir Keir Starmer for Labour dismissed the Budget as an attempt to “simply papers over the cracks” rather than rebuilding the foundations of the economy.

Ian Blackford, the SNP leader, warned the Chancellor was simply laying the ground for “more Tory austerity, a decade more of Conservative cuts”.

In his Commons statement Mr Sunak laid out his three-stage approach to recovery.

“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Second, once we are on the way to recovery, we will need to begin fixing the public finances and I want to be honest today about our plans to do that. And, third, in today’s Budget we begin the work of building our future economy.”

Describing coronavirus as having caused “one of the largest, most comprehensive and sustained economic shocks this country has ever faced,” the Chancellor said the UK’s fiscal response was equally comprehensive and sustained, totalling over this financial year and next £407bn.

He pointed out how the forecast from the Office for Budget Responsibility, the Government’s independent forecaster, showed this year the Government borrowed a record amount: £355 billion.

This represented 17% of the UK’s national income, the highest level of borrowing since World War Two. Next year, borrowing is forecast to be £234bn 10.3% of GDP. “An amount so large it has only one rival in recent history; this year,” said Mr Sunak.

He claimed the measures announced would mean borrowing by 2025/26 would fall to 2.8% of GDP and underlying debt that will peak at 97.1% of GDP by 2223/24 would fall back to 96.8% by 2025/26.

“The amount we’ve borrowed is comparable only with the amount we borrowed during the two world wars. It is going to be the work of many governments, over many decades, to pay it back.

“Just as it would be irresponsible to withdraw support too soon, it would also be irresponsible to allow our future borrowing and debt to rise unchecked. When crises come, we need to be able to act and we need the fiscal freedom to act; a freedom that you only have if you start with public finances in a good and strong place.”

Insisting he had been “honest with the country about the challenges we face,” he set out two key tax measures to begin to fill the financial black hole created by the coronavirus.

While the Chancellor made clear he would stick by the Conservative manifesto pledge not to raise the big three revenue-raisers of income tax, National Insurance and VAT, he confirmed he would freeze the tax-free personal allowance and the higher rate tax threshold from next year until 2026; which effectively means people will be paying more tax.

“I want to be clear with all members this policy does remove the incremental benefit created had thresholds continued to increase with inflation. We are not hiding it, I am here, explaining it to the House and it is in the Budget document in black and white,” said Mr Sunak but he insisted: “It is a tax policy that is progressive and fair.”

As the Chancellor confirmed an additional £1.2bn knock-on payment to the Scottish Government because of the extra Covid measures announced, he declared: “Our future economy depends on remaining a United Kingdom.

“Millions of families and businesses in Scotland, Wales and Northern Ireland have contributed to and benefited from our coronavirus response and central to that has been a Treasury that acts for the whole of the United Kingdom. That is not a political point, it’s an undeniable truth.”

He referred to three Scottish City and Growth Deals in Ayrshire, Argyll and Bute and Falkirk being accelerated and a £27m investment in the Aberdeen Energy Transition Zone to support North East Scotland playing a leading role in meeting the UK’s net zero target as well as a further £5m for the Global Underwater Hub, also in Aberdeen, to ensure the UK’s underwater sector grows alongside the global subsea market.

Sir Keir claimed Mr Sunak’s mask would soon be removed to reveal a Chancellor “itching” to pull away support from hard-pressed Britons.

The Labour leader said: “The Chancellor may think that this is time for a victory lap but I’m afraid this Budget won’t feel so good for the millions of key workers who are having their pay frozen, for the businesses swamped by debt, and the families paying more in council tax.

“And the millions of people who are out of work or worried about losing their job, and although the Chancellor spoke for almost an hour we heard nothing about a long-term plan to fix social care.”

Sir Keir claimed the Chancellor was “betting on a recovery fuelled by a consumer spending blitz”.

In a nod to reports of spiralling costs for the refurbishment of the flat over No 11 Downing Street, he: “In fairness, if my next door neighbour was spending tens of thousands of pounds redecorating their flat, I would probably do the same.

“But the central problem in our economy is a deep-rooted insecurity and inequality and this Budget isn’t the answer to that.”

The Labour leader said behind the spin, the videos and the photo ops, the Chancellor did not believe in an active and enterprising government.

“We know he’s itching to get back to his free-market principles and to pull away support as quickly as he can. One day these restrictions will end, one day we’ll all be able to take our masks off and so will the Chancellor, and then you’ll see who he really is.”

In his response, Mr Blackford said the Budget “completely fails to recognise the sheer scale of the other pandemic our communities are suffering, the poverty pandemic”.

He said: “After a decade of under-investment and Tory cuts, the last year has deepened the UK’s poverty crisis and widened the gaps in inequality. Six million people are now claiming Universal Credit, a 98% increase since the pandemic began.”

Declaring that the Chancellor did “not understand what it’s like to be poor in Boris Johnson’s Brexit Britain,” he called on him to make the uplift in Universal Credit permanent.

After accusing Mr Sunak of undermining the Scottish Parliament with a “naked power-grab” to bypass the devolved parliaments and take control of funding over devolved areas, the Highland MP criticised the Government for not producing a big stimulus recovery package on the scale proposed by US President Joe Biden for America.

“Instead, the Chancellor has produced a Budget that offers people the bare minimum, a Budget that completely fails to take responsibility for the bollocks that they have made of Brexit,” added Mr Blackford.

Mr Sunak ended his speech on a poetic note. Acknowledging the last year had been a test unlike any other, he quoted Tennyson, saying: “’That which we are, we are,’” adding: “The fundamentals of our character as a people have not changed; still determined, still generous, still fair.

“That’s what got us through the last year; it’s what will guide us through the next decade and beyond.”