A Delicate Balancing Act for Jobs
The Budget in 2021 was never going to be an easy one for any government of any colour but in setting out a first step recovery plan the chancellor has effectively balanced funds today, tax tomorrow in a reasonably balanced way. The additional challenge which is clear to see is that the timescales set out do leave wriggle room for another lockdown, although the feel good forecast of recovery by 2022 does not.
So what are the key takeout’s?
Unemployment to rise no higher than 6.1% is 60% of initial estimates so this budget was more about stimulation for employers rather than support for the unemployed. On this basis therefore businesses are being given headroom for short term investment before corporation tax is hiked by 6%.
But for entrepreneurs in smaller businesses the traditional balance of dividend reward versus salary will be diminished by the Corporation tax hike which will doubly penalise. This hike will only hit 10% of businesses but in reality these will be a larger proportion of the enterprise sector.
The extension of the furlough allows businesses time to rebuild rather than take staff back on day one. This is a sensible strategy. Has it headed off a repeat of the volume redundancies of summer 2021, unlikely. A punitive clause linked to post furlough redundancy might have further secured the 6.1% unemployment forecast, without it this target looks under pressure.
The personal tax break suspension will cause some minor traps for employees but is not particularly punitive, but there is a missed trick for NI relief for enterprise businesses.
As part of the continued bailout arrangements there was also welcome funding for many distressed sectors although large parts of hospitality and travel seem under catered for which would suggest some bullishness around the shorter term bounce back of these sectors.
An increase in the incentives for new apprenticeships will promote new opportunity. The scheme looks to be simplified and runs to September,
All in all, given where we were on the 23rd March last year and in the depths of the second wave over Christmas this was a budget and economic outlook that was more balanced and stimulating for jobs than many would have hoped or feared.