Budget day is always a busy one, and the team here at the Money Advice Trust have been soaking up the Chancellor’s announcements and combing through the Red Book to consider what today means for the people we help.
With the continued economic toll of the pandemic, all eyes were on the Chancellor today to provide continued support to those who need it.
Did he meet that expectation? Sort of. Here are 5 things we learned from today’s Budget.
Another six months of support for some…
The widely-trailed six-month extension to the Job Retention Scheme is – of course – to be welcomed. Furloughed workers will continue to receive 80% pay for hours not worked until September, with employers having to contribute to a small but escalating proportion of the cost of this after July. It’s another sign of just how long the Treasury expects the economic impact of Coronavirus restrictions to last – and will come as a big relief to millions.
Similarly, the continuation of the Self-employment Income Support Scheme via a fourth and fifth grant will be welcomed by those eligible. It was a good move by the Treasury to extend access to the scheme to the newly-self-employed who have now completed a tax return for 2019/20 – by the Chancellor’s estimates, around 600,000 more people.
…while the excluded remain just that
However, this leaves millions still without access to the grant – most notably owner/directors of limited companies who, before the pandemic hit, received the majority of their income through dividends. Many in this group may have taken out the Government backed loans. But for those who have exhausted existing options, and with no access to the grant scheme, the Chancellors’ new Recovery Loan Scheme may not be as affordable as anticipated. It remains to be seen what the interest cap on these loans will be set as, but it is so far assumed to be considerably higher than the 2.5% interest charged on the current Government-backed bounce back loan.
The Government must urgently bring forward plans for how it can help owner directors – which account for around 30% of callers to our Business Debtline service. We have suggested a discretionary grant scheme – and there are detailed proposals that have been floated by the Federation of Small Business, Excluded UK and others. If the government fails to act – which is looking increasingly likely – many will never recover.
Some good news on UC, and more in the detail, too
The much-discussed £20 a week uplift in Universal Credit stays until the end of September. As our chief executive Joanna Elson said in our budget reaction today, it’s almost certain that the economic impact of the pandemic will mean this support is needed beyond September, too. It’s the Chancellor’s job to err on the side of caution – if he can get away without prolonging the enormous, penny-on-Income-Tax cost of the uplift, he clearly will. But neither the economic reality nor the politics of this one are going away, and a further extension is surely inevitable.
A closer look at the Red Book also reveals more good news on Universal Credit – including the continued suspension of the Minimum Income Floor, meaning that many self-employed people will continue to be able to receive the benefit at the same level as others based on their actual income, until July. For self-employed people who are continuing to see their finances impacted and arrears build up, this small technical decision has a big impact.
An already-planned reduction to the Universal Credit deductions cap to 25% is being brought forward to April this year – meaning that people will not see their benefit income as badly impacted as before. The option to pay advances back over a 2-year period, up from 18 months, will also provide some relief. Given that many struggle to get by on even full Universal Credit payments, however, unaffordable deduction levels will continue to hurt.
Absolutely nothing for renters
One announcement that was extensively covered in the media ahead of the Budget was the increased access to 95% mortgages, supposedly aimed at first time buyers but open to many others.
However, there was nothing on support for people in private rented accommodation facing repossession when the ban on evictions is lifted at the end of this month. Many people who rent their homes are likely to be struggling – the majority of people contacting National Debtline for help with problem debt live in rented accommodation (around 70%). The Government’s own research shows that private renters report being hardest hit by the pandemic – why then, were they not front and centre, today?
As we called for in our joint statement with landlord groups, housing and debt charities before the Budget, more action is needed to support people struggling with their rent bills. Without this support, many will be facing eviction at the end of this month.
And away from the headlines – funding for No Interest Loans!
For those with a keen interest in debt policy, the inclusion of £3.8 million in funding for the delivery of a no-interest loans scheme pilot was a long-awaited announcement that has escaped much of the Budget media coverage so far. The pilot scheme is aimed at increasing access to short term affordable credit for people in vulnerable circumstances who would otherwise more likely turn to high-cost credit options in times of need.
Fair For All Finance has already done a lot of great work in taking the pilot forward. We hope the pilot will prove a success that will see the scheme rolled out more widely – something that will be vital to ensure many people in vulnerable circumstances have access to the affordable credit they need to support the best possible chance of financial recovery from this outbreak.
So as ever – there was a mix of the good, the bad and the absent, in today’s Budget. For the next six months, at least, this Budget has bought many households time. But September will be here before we know it.