Rishi Sunak poised to continue furlough pay for 10 million workers till the summer
Rishi Sunak discusses the Spring Budget
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The Chancellor is set to announce salaries will continue to be protected in his Budget next month, it is understood. Mr Sunak is also looking at extending a business rates holiday for the retail, hospitality and leisure sectors. He is under pressure to keep spending to protect jobs and business while the country continues to live under Covid restrictions. But economists have also warned the country must eventually be “weaned off” blanket support.
Mr Sunak is likely to keep crucial financial support in place during the lockdown but scale back the cash as the country starts to return to normal.
But the scheme will continue to support and protect millions of jobs through the summer months.
Government sources said the Chancellor has been clear that “protecting and supporting people through the acute phase of the crisis is his number one priority”.
More than £280billion has been pumped into the economy so far, including cash to protect jobs and businesses as well as extra funding for public services.
Government figures show that 13 percent of jobs across the country were furloughed on December 31, and that more than one in three employers was claiming money to pay staff. It is due to finish at the end of April. But Mr Sunak has recently warned he “can’t save every job” and it must be a “private-sector-led recovery”.
Pubs and restaurants are expected to be among the last businesses to reopen when lockdown is eased.
Mr Sunak is looking for ways to claw back cash in the Budget but is also constrained by Tory manifesto pledges to leave VAT, National Insurance and Inheritance Tax untouched.
Capital gains tax and corporation tax hikes are among changes being considered.
Government borrowing jumped to £8.8billion last month, the highest January rate since 1993. But it was lower than the £25billion predicted by economists.
The Institute of Economic Affairs said the better-than-expected performance should be the “final nail in the coffin” for any attempt at raising taxes in the Budget. Julian Jessop, of the Institute of Economic Affairs, said: “Looking past the headlines, the latest data on the public finances were actually better than expected. Borrowing in January was about £16billion lower than forecast.
This continues a pattern which has been badly under-reported. Monthly borrowing has consistently undershot the official projections, with cumulative borrowing in the 10 months to January now £69billion less than the Office for Budget Responsibility had estimated in November.
“This should be the final nail in the coffin for any tax rises in the March Budget.”
The Institute for Government warned the Chancellor his Budget must play a key role in the government’s lockdown exit strategy.
It said Mr Sunak will undermine the plan if his budget does not back it up and warned he “cannot expect to embark on an unwavering journey to economic recovery”.
It added: “Economic policies made in the Treasury need to be aligned with the Government roadmap. Any new plan will be undermined if the Treasury is not on board.
“At other key moments in the crisis the Department has pursued policies that have been mistimed or inconsistent with other Government initiatives, and it has been slow to adapt.”
London business leaders have written to Mr Sunak warning that firms “are crippling under the weight of the pandemic”.
Richard Burge, chief executive of the London Chamber of Commerce, said: “This Budget presents a vital opportunity to demonstrate a support for London and its UK role, along with a clear recognition that the pandemic has hit businesses and workers in the capital harder than many other places in the UK.”
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