SPRING BUDGET 2021: Chancellor announces furlough extension measures.

4th March 2021

Chancellor Rishi Sunak has announced the extension of several Covid-19 support schemes until the end of September, including the furlough scheme, self-employed income and an extension of the universal credit uplift as part of his budget announcement.

In response to the budget debt charity StepChange says that the budget announcement extends much-needed support for people who have been financially affected by the pandemic. In particular, the extension of the furlough scheme until September is welcome recognition that the financial effects of Covid will be felt for many months to come.

The charity says that changes to Universal Credit, including the six-month extension of the £20 uplift, the limiting of deductions to 25% and the bringing forward of the extension of the advance repayment timeline to 24 months will help to keep millions of heads above water while national restrictions continue to be in place.

Richard Lane, Director of External Affairs at StepChange, said “The extension of the furlough scheme until September is a crucial acknowledgement that, while the country may be hoping to be ‘back to normal’ by the end of June, millions of households’ finances will be anything but. This principle needs to be reflected more widely in other support, too.”

“The extension to the £20 uplift to Universal Credit will provide short-term relief to millions currently relying on it to feed their families, pay their bills and keep their homes, however the one-off payment of £500 in working tax credits risks eating into the existing debts of anyone with a negative budget or in problem debt rather than providing the much-needed boost to day-to-day income of a regular payment”.

“That’s why StepChange is calling for the £20 uplift to Universal Credit and the boost to working tax credits to be kept permanently – unemployment is set to be at its peak in 6 months, and if these measures are dropped people relying on them will be faced with the lowest relative level of unemployment benefit in nearly 20 years.”

“People behind on their rent also need support to avert the real risk of mass housing insecurity and homelessness – it’s disappointing that the Budget did not recognise the urgency of this need. While it is helpful to see the Government’s continued commitment to the No Interest Loan Scheme pilot today, the need to learn quickly from this and urgently scale up the concept is clear. In particular, we need the Government to create a system of grants and interest-free loans that will allow renters to deal safely with arrears built up over the course of the pandemic. Without these types of support, the Government risks hampering the ambitious plans the Chancellor has set out for economic recovery.”

Joanna Elson CBE, Chief Executive of the Money Advice Trust said “Another six months of support – whether through furlough, the Universal Credit uplift or small business grants – will come as a relief for many.  Fast forward to October, however, and millions of households will still be facing financial difficulty caused by Covid-19.”

“The Government must be prepared to extend its £20 a week uplift to Universal Credit beyond October if the continued economic impact of the pandemic demands it – which is all but certain to be the case.  This decision needs to be taken early, and not left until a month before the uplift ends.  The Chancellor said today that business needs certainty – households do, too. “

“The extension of the Self-Employment Income Support is welcome, particularly for the newly self-employed who are now eligible for help. Owner-directors have yet again been excluded, however – and we urge the Government to urgently bring forward plans for how it can help, including through a discretionary grant scheme.”

Alistair Cromwell, Acting Chief Executive of Citizens Advice, said “It will be a huge relief for people on Universal Credit to not face a cut to their benefits next month. But with a challenging recovery ahead of us, this is a stopgap.”

“A six-month extension kicks the can down the road, only to leave millions facing a financial cliff edge in the autumn.”

“We urge the government to think again. The Universal Credit uplift must be kept for at least a year to help people pick up the pieces from this crisis.”

Stephen Haddrill, Director General of the FLA, said “As lockdown restrictions begin to ease, there is a real need to instil confidence among consumers and businesses to ensure that any recovery in the economy can be sustained.”

“The short-term certainty offered by the extension of furlough into September to help employers and employees is welcome – as is the Chancellor’s support for an investment-led recovery.  We also note that the super deduction capital allowance scheme will include plant and machinery acquired on asset finance – an extremely useful measure as leasing and hire purchase are the products of choice for more than a third of the UK’s total investment in equipment, plant and machinery and purchased software.”

David Postings, Chief Executive of UK Finance, said “The Chancellor has set out a bold plan to support the economy in today’s Budget. The banking and finance industry has taken unprecedented action over the last year to support businesses and customers, and we will continue to work closely with the Government to help the nation get back on its feet. This is a well-constructed Budget that positions the UK as an open and internationally competitive place to do business and we welcome the measures set out by the Chancellor to achieve this vision.”

Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets, said“The Chancellor’s decision to extend the furlough scheme, to provide further business grants and a new loans scheme, and to continue the business rates holiday will give welcome certainty for many business owners concerned at their prospects over the coming months. The new Super Deduction measure could also be a huge boost for business investment at a crucial time for the economy.”

“However, what was missing from the Chancellor’s Budget was detail about the Government’s role once these measures start to be withdrawn. As a key creditor in most corporate insolvencies, the Government has a direct role to play in supporting viable restructuring and business rescue proposals. HMRC in particular has not always taken a constructive approach to these proposals and we would like to see this change sooner rather than later.”

“By taking a more active and engaged stance as a creditor, the Government could help to save more potentially viable businesses, thereby safeguarding thousands of jobs, securing future tax income, and giving companies a chance to deal with liabilities resulting from the pandemic’.

“There’s no denying the Government’s COVID measures have helped businesses in the short term, but as the Chancellor pointed out, these can’t last forever. Directors of struggling companies now have a few months in which to start making plans and taking decisions to secure the future of their businesses.”

“We would urge directors and business owners to use this time to seek advice from a qualified source as early as possible, to give them the broadest range of options for resolving the issues their businesses face.”

Nick Hill, Money Expert at the Money and Pensions Service said “The measures announced in today’s Budget will continue to provide support for people impacted by the Covid-19 pandemic. However, we know how worried many people are about money right now and dealing with complex financial situations. It can be hard for many people to know where to start in terms of getting help, but it’s really important they know that they are not alone in this.”

IoD Chief Economist Tej Parikh said “Business leaders will breathe a sigh of relief that the furlough scheme has been extended further into the year.”

“Many firms have tapped into the Job Retention Scheme to support their cashflow while restrictions have eaten into their revenues, and without it jobs losses would be even higher. By extending support until end-September, the Chancellor has also given many businesses an extra cushion as they attempt to rescale and rehire when the economy reopens.”

“Widening the eligibility for self-employed income support is also welcome step, as many have gone without significant earnings for almost a year. Small company directors who have also been ineligible for Government support will also be hoping for provisions in the Budget.”

“It is important the Chancellor builds on these announcements in the Budget, by extending more of the Government’s covid-19 economic support package beyond the spring, and by providing a stimulus to jumpstart business growth and investment.”

Paul Burgess, CEO, Startline Motor Finance, said “This was a heavily trailed Budget that brought few surprises but importantly, provided what appears to be a strong degree of cover for the economy as we move out of the pandemic during the course of this year. For example, extending the furloughing scheme and continuing to reduce business rates will provide financial stability for businesses and for individuals, allowing them to plan for the rest of 2021 with a high degree of certainty. Ultimately, moves such as these should also protect the viability of jobs and employers. While we’ll all have to start paying the bill for this enormous spending at some point in the future, that time appears to have been largely postponed with the Corporation Tax rise not coming into effect until 2023. Overall, while all kinds of questions remain about the economy in the medium-long term, this is a Budget that has delivered most of what we’d have hoped for.”