The UK Government has made its budget announcement today, while the Welsh Government announced its budget yesterday.
Some measures announced by UK Chancellor Rishi Sunak will apply to Wales, while quite a bit won’t.
We try and unpick what’s relevant from each one.
Wales gets extra cash from UK Government
Straight off the bat, Wales gets an extra £740 million in funding through the Barnett Formula (the mechanism which provides Wales with funding when England gets extra spent on it).
This money is not ringfenced and means the Welsh Government can spend it as it sees fit.
What’s in the Welsh Government budget?
Finance Minister Rebecca Evans unveiled the Welsh Government’s budget on March 2. Around £1.1bn extra will be spent in 2021/22 compared to the previous year.
It includes an extra £224m for housing, schools and other infrastructure projects, and £630m for the NHS and councils.
While £200m has been set aside to support businesses, no fine details about the support has been published.
Active travel – a term used to describe walking and cycling – will get £75m for schemes to encourage it.
What about the UK Government budget?
There was plenty in the UK Government budget not applicable to Wales – such as the extension to the temporary cut in Stamp Duty Land (that’s devolved) – but there was still plenty that does apply.
The National Living Wage will be increased to £8.91 from April and there will also be a six-month extension of the £20 per week Universal Credit uplift, with eligible Working Tax Credit claimants receiving a one-off payment of £500. People’s personal tax allowance will rise next year to £12,570 and will then remain unchanged until April 2026.
Fuel and alcohol duty have been frozen and the upper limit for contactless card payments will rise to £100.
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What about business support?
Anything to do with direct business support, job creation, and business rates from Rushi Sunak should be ignored – that is the domain of Welsh Government.
The furlough and Self-Employment Income Support schemes have been extended until September, and the temporary VAT rate of 5% for tourism and hospitality has been extended until September 30. A 12.5% rate will then apply for a further six months, until 31 March 2022.
The rate of Corporation Tax will increase to 25%, but won’t take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
Beginning April 2021, a new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment meaning they can reduce their taxable profits by 130% of the cost.
A new Recovery Loan Scheme will also be launched to replace the existing government guaranteed schemes which have supported £73 billion of lending to date and close at the end of March.
Following the UK budget announcement, the Welsh Government confirmed that the business rates holiday for the retail, leisure and hospitality sectors in Wales will be extended for a further 12 months.
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