Adam Jackson, Director, Public Affairs, Policy and Insights, Grant Thornton UK LLP, commented:
“This was set to be the most significant Budget since George Osborne’s first Budget ten years ago. It may turn out to be closer to Alistair Darling’s Budget of 2008, when he set out measures to mitigate the financial crash. We have been expecting this Budget to provide some clarity on what Brexit Britain looks like: the patterns of tax and spending, and what this will mean for the business environment, international investment, public services, communities across the UK and individual workers and savers.
“In practice, it may now be overshadowed by Coronavirus and the oil price war, as government focuses on its contingency plans and responding to the economic shock. Just as Brexit has made recent Budgets ‘placeholders’ during a time of uncertainty, so this week’s Budget may pull its punches on some of the big policy and fiscal changes, to enable government, business and the wider economy to focus on the risk of a global pandemic and economic downturn.
“It is now increasingly likely that we will see a stripped back Budget that focuses on two things. The first being the UK’s response to Coronavirus and budgeting for increased spend, including: a spike in welfare and benefits payments arising from illness, support for otherwise viable businesses, civil contingency plans, and health and social care.
“The second will be our new government starting to implement specific election manifesto commitments. These include spending plans for a Skills Fund, the NHS and infrastructure, raising the NIC threshold and increasing R&D tax credit.
“The first Budget after an election usually always increases tax overall – this is the point in an electoral cycle where government can risk tax rises to create headway for tax reductions towards the next election. The government has committed not to raise income tax, NIC or VAT and has already signalled that it will hold corporation tax at 19%. But we do expect to see tax rises on wealth and capital gains, as Entrepreneurs Relief on capital gains tax is likely to be abolished. As promised, we also expect that R&D tax credits will be increased by 1%, and a review into R&D incentives published looking at wider measures to support innovation.
“Whilst many planned reforms will be delayed due to coronavirus uncertainty, this Budget should start to set out a vision for the future UK economy. This will be inter-twined with an objective of ‘levelling up’ local economies within the UK, particularly strengthening the Midlands and the North of England. Infrastructure investment is key to this and, as well as funding, we will be looking for further detail on implementation and delivery models, and awaiting the now delayed publication of a National Infrastructure Strategy.
“With significantly increased spending and potential changes such as the removal of entrepreneur’s relief, this may look very different to any Budget previously presented by a Conservative government.”