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Wednesday, Jul 09, 2025

UK govt budget extends furlough scheme, unveils corporation tax hike to plug economic black hole of wage-paying jobs lost to Covid

UK govt budget extends furlough scheme, unveils corporation tax hike to plug economic black hole of wage-paying jobs lost to Covid

The UK government will continue to pay the wages of people who have lost work due to Covid-19 until September, Chancellor Rishi Sunak told MPs in the House of Commons on Wednesday as the country's 2021 budget was unveiled.
The extension of the UK's so-called "furlough scheme" means that the government will cover up to 80 percent of the wages of employees that businesses cannot afford to pay.

The UK economy suffered a record GDP slump of 9.9 percent in 2020 – the biggest such decrease since records began in the 1940s.

Despite the historic shrinkage, Sunak said the UK economy could return to its pre-pandemic level by the middle of 2022, according to a forecast by the Office for Budget Responsibility.

Sunak outlined multiple actions under what he said was a three-part plan in his budget focused on jobs and livelihoods, the public finances and the UK's future economy.

One of the most significant measures announced was an increase in the corporation tax from 19 percent to 23 percent, a move Sunak had been widely expected to pursue in order to start paying back government debt.

"These are significant decisions to have taken. Decisions no chancellor wants to make. I recognise they might not be popular, but they are honest," Sunak said.

Businesses in Britain's hospitality and tourism industries, which have been devastated by the pandemic, will also be given a six-month extension to the 5 percent reduced rate of VAT, Sunak said.

Among the main measures affecting people's everyday lives include that 600,000 more self-employed people will now be able to claim government grants.

The Chancellor also announced some £19 million for domestic violence programmes to address what he called "one of the hidden tragedies of lockdown."

Sunak revealed that the government has borrowed a record £355 billion this year, its highest level since World War II.

He also said the government would cancel all duties on alcohol and fuel, pledged to invest more in green energy, unveiled funding for the arts, and announced a task force of 1,000 HMRC investigators to clamp down on fraud related to tax avoidance and evasion.

The opposition Labour leader Keir Starmer accused Sunak of "papering over the cracks instead of rebuilding the foundations" with his budget.

Starmer said the budget failed to properly address Britain's health service, unemployment, the climate emergency and inequality.
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