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- The Chancellor will deliver the Budget on 6 March 2024 and the Government will later introduce the a Finance Bill to implement it. The presentation of the annual Budget and the Finance Bill would usually happen in the Autumn. However, over the past few years, there have been economic and fiscal statements outside the regular Budget timetable.
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Mar 6, 2024 · Measures introduced at Spring Budget will protect levels of funding for the NHS in England in real terms in 2024-25 by providing an extra £2.5 billion for 2024-25 meaning a total budget of...
- 1. Executive summary
- 2. Economy and public finances
- 3. Policy decisions
- 4. Budget for the whole United Kingdom
- 5. Responding to COVID-19
- 6. Financing
- 7. OBR’s Economic and Fiscal Outlook
The Budget follows a year of extraordinary economic challenge as a result of the ongoing COVID-19 pandemic. Like that of many other countries, the UK’s economy has been hit hard, with both the direct effects of the virus and the measures necessary to control it leading to an unprecedented fall in output and higher unemployment.
In the face of this threat, the government acted swiftly to provide support to protect businesses, individuals and public services across the UK, adapting its economic response as the pandemic evolved. Thanks to people’s hard work and sacrifice, supported by the success of the initial stages of the vaccine rollout, there is now a path to the reopening of the economy.
The Budget sets out how the government will extend its economic support to reflect the cautious easing of social distancing rules and the reopening of the economy in the government’s roadmap[footnote 1]. Support in the Budget reflects the easing of restrictions to enable the private sector to bounce back as quickly as possible.
As the economy reopens, the Budget sets out the steps the government is taking to support the recovery, ensuring the economy can build back better, with radical new incentives for business investment and help for businesses to attract the capital, ideas and talent to grow.
Once economic recovery is durably underway, the public finances must be returned to a sustainable path, following a period of record peacetime borrowing. The Budget sets out clearly the size of the challenge and steps to deliver more sustainable public finances, providing certainty and stability to people and businesses and supporting a strong recovery. This action will be underpinned by principles of fairness and sustainability as the government continues to invest in excellent public services and infrastructure to create future growth.
By taking action to protect the economy, support the recovery and repair the public finances, the government is taking the most sustainable route to continuing to deliver first-class frontline public services, funding investment to level up across the whole of the UK, and creating an outward-looking, low-carbon, high-tech economy.
The challenges faced by the UK over the past twelve months have been substantial, and the period since the beginning of the year has been the most difficult yet. Responding to the emergence of a new and more transmissible variant of COVID-19, the government took the necessary decision to increase restrictions in order to protect the NHS and save lives. The economic impact of these restrictions has been substantial, though it would have been worse without the unprecedented steps the government has taken throughout the pandemic to protect jobs and livelihoods, support businesses and boost public services across the UK.
The Budget sets out the next phase of the government’s response, providing additional support for people, public services, and businesses most affected by the pandemic of £65 billion in 2020-21 and 2021-22. The Budget confirms the continuation of the Coronavirus Job Retention Scheme (CJRS) in its current form until the end of June 2021, further income support for the self-employed, and continued significant welfare support. The measures in the Budget, particularly the CJRS extension, will provide further support to the labour market and the wider economy. The OBR now expect the peak in unemployment to be 340,000 lower than that assumed in their November forecast.
The success of the UK’s vaccine programme means the UK can now chart a clear course out of lockdown and the additional measures in this Budget will strengthen the economic recovery. The roadmap will allow businesses to open, providing consumers with more opportunities to spend some of the additional £125 billion of savings accumulated so far during the pandemic. The Budget sets out measures to help the economy bounce back as restrictions are lifted, including a temporary uplift to capital allowances that the OBR expect to raise the level of business investment by around 10% at its peak in 2022-23. In total, the OBR expect GDP to be approximately 0.75% higher in the spring and summer of 2021 due to measures announced since November, and the economy to return to its pre-COVID size six months earlier than previously expected. The unemployment rate is now expected to peak 1 percentage point lower than in the OBR’s November forecast.
The Budget builds on the government’s existing support, which has helped to limit lasting damage while strengthening the economy in the longer term. Including measures announced at Budget 2020, total support for the economy comes to £407 billion this year and next year – the largest peacetime support package for the economy on record. This includes a step change in capital investment, which will deliver the highest sustained levels of public sector net investment as a proportion of GDP since the late 1970s. The Budget lays the foundations for a strong recovery and greener economy, levelling up the country and spreading prosperity across every part of the UK.
The following chapter sets out all Budget 2021 policy decisions. Unless stated otherwise, the decisions set out are ones which are announced at the Budget.
Table 2.1 shows the cost or yield of all Budget 2021 decisions with a direct effect on PSNB in the years up to 2026-27. This includes tax measures, changes to Departmental Expenditure Limits (DEL) and measures affecting annually managed expenditure (AME).
The government is also publishing the methodology underpinning the calculation of the fiscal impact of each policy decision. This is included in ‘Budget 2021: policy costings’ published alongside the Budget.
The supplementary document ‘Overview of Tax Legislation and Rates’, published alongside the Budget, provides a more detailed explanation of tax measures.
4.1 Delivering for the Union
Throughout the pandemic the government has acted to protect health, jobs, livelihoods and businesses, and to strengthen public services across the UK. The Budget sets out steps to provide long-term economic certainty for all UK citizens and secure an investment-led recovery for the whole country. The majority of the measures set out in the Budget apply to individuals and businesses in every part of the UK. On top of these UK-wide measures, the Budget also confirms an additional £2.4 billion for the devolved administrations in 2021-22 through the Barnett formula and targeted investment in specific places and sectors across Scotland, Wales and Northern Ireland. In the year that the UK hosts the COP26 climate change conference in Glasgow and marks the Northern Ireland Centenary, the government continues to work for every part of the UK, protecting and promoting the combined strengths of the Union, building on 300 years of partnership and shared history.
4.2 Providing UK-wide support throughout the pandemic
The combined fiscal strength of the UK has allowed the government to protect millions of jobs and livelihoods across the UK through its COVID-19 schemes and to drive the development and procurement of the UK’s world-leading vaccine programme. On top of this, the government has funded the devolved administrations to provide their own support schemes in Scotland, Wales and Northern Ireland. COVID-19 economic interventions Prior to the scheme’s November extension, the CJRS had already protected almost 780,000 jobs in Scotland, over 400,000 jobs in Wales and almost 250,000 jobs in Northern Ireland.[footnote 89] In addition to this, across the first, second and third SEISS grants there have been 431,000 claims in Scotland, 295,000 claims in Wales and 210,000 claims in Northern Ireland, totalling over £2.5 billion of support.[footnote 90] The £20 a week increase to the Universal Credit standard allowance and Working Tax Credit basic element has provided additional support to the least well-off in all parts of the UK.[footnote 91] The government’s business loan guarantee schemes have provided a lifeline to over 90,000 businesses in Scotland, over 57,000 in Wales and over 39,000 in Northern Ireland.[footnote 92] The economies of Scotland, Wales and Northern Ireland have received support through VAT deferrals and reductions, generating a cashflow benefit worth around £34 billion across the UK and easing the burden on business while their income has been disrupted. Targeted VAT support for the tourism and hospitality sectors across the UK has been key in Scotland, Wales and Northern Ireland, due to the importance of these sectors in all three economies. Box 3.A: Devolved administration COVID-19 funding support As a result of the COVID-19 pandemic and following discussions with the devolved administrations, the government announced the unprecedented Barnett guarantee in July 2020. This provided the devolved administrations with upfront funding certainty, enabling them to plan how and when to provide support in relation to COVID-19 in 2020-21. The government initially guaranteed an additional £12.7 billion on 24 July. This guarantee was increased three times to reflect the changing situation: to £14.0 billion on 9 October; £16.0 billion on 5 November; and £16.8 billion on 24 December. In addition to this, the government confirmed a further £2.1 billion in February 2021 that the devolved administrations can spend in 2020-21 or 2021-22.[footnote 93] Public health response and vaccine rollout Throughout the pandemic, the people of Scotland, Wales and Northern Ireland have contributed to, and benefitted from, the UK’s public health response. The government has provided around £22 billion for NHS Test and Trace this year and announced a further £15 billion next year. All parts of the UK are receiving a share of the tests and the devolved administrations are receiving funding through the Barnett formula in relation to rollout. The UK has more capacity than any country in Europe and one of the highest per capita testing rates in the world. The Vaccines Taskforce (VTF) has also provided UK-wide leadership on the procurement of COVID-19 vaccines. As part of this, the government agreed to make available more than £6 billion to support the procurement, development and manufacture of COVID-19 vaccines. The UK’s ability to move at speed and invest at-scale and at-risk has translated into success, securing access to up to 457 million doses of COVID-19 vaccines from eight different manufacturers and was the first country in the world to authorise and deploy the Pfizer/BioNTech and Oxford/AstraZeneca vaccines outside of a clinical trial. The government has already announced that three of the most advanced COVID-19 vaccines will be manufactured either fully or partly in the UK, including the Valneva vaccine at a facility in Livingston, Scotland. The government has also provided funding to enhance the Valneva facility’s capability and to reserve capacity in Wrexham, Wales to support the immediate manufacture of the Oxford/AstraZeneca vaccine.
4.3 Protecting the jobs and livelihoods of the British people
Supporting individuals The government is extending the CJRS until September 2021 and setting out the next steps for the SEISS. These will continue to provide vital support for people across all parts of the UK. Universal Credit claimants in Scotland and Wales will also benefit from the government’s extension of the £20 per week increase to the standard allowance for a further six months, on top of the planned uprating. The Northern Ireland Executive will be funded to match this increase. Alongside this, the government will make a one-off payment of £500 to eligible Working Tax Credit claimants across the UK to provide additional support over the next six months. Individuals in all parts of the UK will also benefit from the government’s new mortgage guarantee scheme, allowing first-time buyers and existing homeowners the chance to secure a mortgage on homes up to £600,000 with just a 5% deposit. Further help for businesses The government is launching the new Recovery Loan Scheme, open to all UK businesses. This will support businesses in Scotland, Wales and Northern Ireland to access loans of between £25,000 and £10 million. Scotland, Wales and Northern Ireland’s crucial tourism and hospitality sectors will also benefit from the six-month extension to the UK-wide VAT reduction to 5% until 30 September 2021, with a further reduced rate of 12.5% for the following six months. This will bring another full year of VAT relief for these businesses until 31 March 2022, providing continued support to over 150,000 businesses and helping to protect over 2.4 million jobs. The government is also helping people and industries in Scotland, Wales and Northern Ireland through freezes to the rates of duty on fuel and alcohol. Continuing the freeze on alcohol duty will benefit the spirits sector by avoiding an increase of 30p on a 70cl bottle of spirits, while the freeze to fuel duty will support hard-working people across the UK, particularly in more rural communities.
Between March and December 2020, the government announced over £280 billion[footnote 96] of economic support that strengthened public services and protected businesses and individuals in every part of the UK from the worst effects of the pandemic and the restrictions introduced to limit the spread of the virus. As measures to prevent further spread of the virus evolved, government responded with adapted support.
The government has provided unprecedented support to the devolved administrations to facilitate their response to COVID-19, in addition to UK-wide measures. Building on the £16.8 billion upfront Barnett guarantee for this year, the government announced a further £2.1 billion in February 2021 that the devolved administrations can spend this year or next year. From the start of the pandemic to February 2021 the total Barnett funding allocated to the devolved administrations has reached nearly £19 billion, including £9.7 billion for the Scottish Government, £5.9 billion for the Welsh Government and £3.3 billion for the Northern Ireland Executive.[footnote 97] This funding has enabled the devolved administrations to deliver support where the programmes set out below don’t apply across the whole of the UK.
This annex sets out government economic support announced since the beginning of the pandemic to 28 February 2021. Where the Budget announces extensions to or updates on these support schemes, details can be found in chapter 2 of this document.
These unprecedented economic support schemes have benefited all parts of the United Kingdom. Figure A.1 illustrates the regional and national range of some of the major COVID-19 support schemes for businesses and individuals.
6.1 Debt management objective
The debt management objective, as set out in the ‘Debt management report 2021-22’, is “to minimise, over the long term, the costs of meeting the government’s financing needs, taking into account risk, while ensuring that debt management policy is consistent with the aims of monetary policy.”
6.2 Debt management policy
While decisions on debt management policy must be taken with a long-term perspective, specific decisions on funding the government’s gross financing requirement are taken annually. Those decisions are announced before the start of the forthcoming financial year and can be updated during the year. In reaching a decision on the overall structure of the annual debt financing remit, the government considers the risks to which the Exchequer is exposed through its debt issuance decisions and assesses the relative importance of each risk in accordance with its risk appetite. For example, the government places a high weight on minimising near-term exposure to refinancing risk. This exposure is managed partly by maintaining a sizeable proportion of long-dated debt in the portfolio, which reduces the need to refinance debt frequently. Relatedly, all else equal, this also reduces the government’s exposure to interest rate risk in the near term. The government is particularly mindful of risks, including interest rate risk, in light of the significant increase in the debt stock that has taken place during 2020, as detailed in Box [1.D].
6.3 Green gilts and retail savings product
In November 2020, the Chancellor announced the government’s intention to issue its inaugural green gilt in 2021. The Budget announces further details, including that the government will issue its first green gilt in the summer, with a further issuance to follow later in 2021, as the UK looks to build out a ’green curve‘. Planned green gilt issuance for the financial year 2021-22 will total a minimum of £15 billion. The green gilt framework, to be published in June 2021, will detail the types of expenditures that will be financed to help meet the government’s environmental objectives. The government also commits to reporting on the contributions of green gilt-financed spending towards social co-benefits such as job creation and levelling-up. The Budget also announces plans for a green retail product to be offered through NS&I later in 2021. Proceeds from this product will not contribute towards NS&I’s 2021-22 financing remit.
The Office for Budget Responsibility (OBR) has published its March 2021 ‘Economic and fiscal outlook’ alongside Budget 2021. This annex reproduces the OBR’s key forecasts for the economy and public finances. Further detail and explanation can be found in the OBR’s report.
1.COVID-19 Response – Spring 2021, Cabinet Office, February 2021. ↩
2.GDP first quarterly estimate UK October to December 2020, ONS, 2021. ↩
3.‘A millennium of macroeconomic data’, Bank of England, 2017. ↩
4.Spending Review 2020, HM Treasury, November 2020. ↩
5.‘Build Back Better: our plan for growth’, HM Treasury, March 2021. ↩
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