Chancellor Sunak Says Additional U.K. Covid Support Is £65 Billion

Rishi Sunak extended emergency tax cuts to help the British economy recover from the coronavirus but warned he will ask profitable businesses to help pay the huge bill for the U.K.’s pandemic support.

With the country mired in a third national lockdown, the chancellor of the exchequer has made clear that safeguarding jobs is his priority in the short term. He said he’s adding another 65 billion pounds ($90.7 billion) of pandemic support to help the country recover this year and next year.

But Sunak sketched out a plan to start plugging the deficit, with an increase in corporation tax to 25% from the current 19%, taking effect in 2023.

“The government is providing businesses with over 100 billion pounds of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery,” Sunak said in Parliament on Wednesday. “Even after this change the U.K. will still have the lowest corporation tax rate in the G-7.”

Since corporation tax is only charged on profits, “any struggling businesses will, by definition, be unaffected,” the chancellor added.

Budget details announced so far include:

-Income tax thresholds will be frozen for basic and higher rate, potentially dragging more people into paying more tax as their earnings increase

-The furlough scheme will be extended through September. As businesses reopen, from July, they will be asked for a contribution of 10%, rising to 20% in August and September

-The 5% reduced rate of VAT will be extended for six months to Sept. 30

-The stamp duty holiday, which pauses taxing home sales, will be extended until June 30

-The 20 pound a-week uplift to Universal Credit welfare payments will be extended for six months

Planned rises in alcohol and fuel duty will be canceled

-The U.K. economy, which shrank almost 10% last year, is forecast to expand by 4% in 2021, according to Office for Budget Responsibility data.

-The economy will grow 7.3% next year, stronger than the 6.6% pace forecast in November, the OBR said. After five years, the economy will remain 3% smaller than it would have been without the pandemic.