Housebuilders and the high street are set to be among the winners following Wednesday’s Budget by Rishi Sunak.
The Chancellor is expected to extend stamp duty holiday on residential transactions under £500,000 until the end of June as well as resurrecting a more generous ‘Help to Buy’ scheme to support first-time buyers.
The government would provide state guarantees to allow people to dish out only a 5% deposit on homes worth up to £600,000, The Sunday Times reported.
Meanwhile, the retail, hospitality and leisure sectors would enjoy business rates holiday a bit longer, alongside the extension of a temporary VAT cut from 20% to 5% for hospitality and tourism.
The Treasury is to unveil a £5bn pot for grants to high street shops, pubs, restaurants and personal service firms such as hairdressers, with 700,000 firms given the opportunity to claim up to £18,000.
Reports from last month suggested a new ‘Eat out to Help Out’ initiative may be implemented to encourage consumers to spend.
Looking at the wider economy, the furlough scheme and Self-Employment Income Support scheme are also expected to continue until at least June, at the price of £15bn on public finances.
Sunak is also hamstrung by PM Boris Johnson’s promises in the election of 2019 not to increase income tax, national insurance or VAT, but it seems corporation tax is to be raised from 19p in the pound to 25p over the course of the parliament.
An increase to 22p alone would add £10bn to the government’s pockets, while Berenberg said a 1-2% hike would not have any major negative economic consequences.
Analysts said there are no further changes to tax to be implemented in the short term, but markets should expect some major ones at the next budget, possibly in November.
It wouldn’t breach the Tory manifesto pledge, but former chancellor Lord Lawson said “it would be stupid” for the Conservatives to become the party of high taxes, The Times reported.
However, the UK is under pressure to plug a £43bn black hole in public finances, as even a 1% rise in government borrowing costs taxpayers £25bn a year.
In the current financial year, Westminster has borrowed £271bn, with the national debt rocketing to £2 trillion – or nearly 100% of gross domestic product.
In fact, Sunak has already cut £4bn from overseas budget, while plans to raise income tax receipts should bring in £6bn by pushing 1.6mln people into a higher tax bracket.
He is expected to allocate £22bn to a national infrastructure bank, which will fund £40bn worth of projects with the help of private sector investors.
The UK will also establish the world’s first sovereign green savings bond for the public to invest in green energy and clean transport projects, with £20mln for offshore wind, £70mln in low-carbon energy storage and £4mln to produce green-energy crops.