POST-Covid Britain is to power through the decade with its fastest economic growth since World War Two.
The Office for Budget Responsibility massively upgraded its assessment of UK PLC thanks to the super-fast vaccine rollout.
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Unveiling his Budget, Rishi Sunak said Britain’s economic outlook is much more optimistic than some feared.
And economists predicted the country is heading for another “Roaring Twenties” as the UK races forward out of the pandemic.
The OBR said Brits could go on a £45billion spending binge as restrictions are lifted.
Families freed from Covid restraints could be overcome by a “sense of euphoria” and splurge the savings they have amassed over lockdown, the Treasury watchdog added.
This could fuel a boom in car sales and other “durable goods”.
Its report said: “There may be a degree of euphoria once the pandemic is passed, leading households to wish to treat themselves.”
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It added after five years, “around 25 per cent of the total stock of £180billion built up during the pandemic will have been used for consumption”.
And most of this will be spent in the next two years.
And yesterday, the Chancellor vowed to turbocharge that recovery by creating tax-free zones and pumping billions into northern towns.
Mr Sunak told MPs: “The OBR now expects the economy to return to its pre-Covid level by the middle of next year — six months earlier than previously thought.
“That means growth is faster, unemployment lower, wages higher, investment higher, household incomes higher.”
Matt Kilcoyne, deputy director of the Adam Smith Institute, said: “The Roaring Twenties are back.
‘BOOST EMPLOYMENT’
“The Chancellor is betting big on British businesses to invest in their own futures, knowing they know best the situations and circumstances they’re facing.
“The free market is the best vehicle we have to boost employment, wages and a modern diverse economy fit for the future.”
After suffering its biggest fall in 300 years, the economy will bounce back by four per cent this year, the OBR predicted.
This will rocket to a bumper 7.3 per cent next year — the highest growth since 1941.
Unemployment is expected to peak at 6.5 per cent — far lower than the 11.9 per cent the OBR originally forecast.
This means 1.8million fewer Brits will be out of work.
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However, the OBR warned that long-term “Covid scarring” means that in five years’ time, the economy will still be three per cent smaller than it would have been without the effects of the pandemic.
The Treasury watchdog based its numbers on some Covid restrictions lasting for another year.
But Boris Johnson has vowed to tear them all up in June if the vaccine programme continues going to plan.
It raises the prospect that the UK’s economy could bounce back even more quickly.
Mr Sunak said the economic recovery will be powered by a swathe of tax breaks for businesses that invest in Brexit Britain.
Eight ultra low-tax free port zones will be created across Britain’s former industrial heartlands to kick-start a new manufacturing boom.
What is the Budget?
THE Budget is when the government outlines its plans for tax hikes, cuts and things like changes to the minimum wage.
It’s different to the Spending Review, which sets out how much public cash will go towards funding certain departments, devolved government’s and services, such as the NHS.
The Budget is read out in the House of Commons by the Chancellor of the Exchequer. It will be Rishi Sunak’s second Budget as Chancellor.
Mr Sunak’s first one in March last year has been dubbed the “coronavirus Budget” after it focused on supporting Brits financially through the crisis, rather than the government’s “levelling up” agenda as promised in the 2019 general election.
Normally, the Budget is held once a year but the unprecedented circumstances of the pandemic in 2020 saw Mr Sunak give a “mini-budget” in the Commons on July 8.
And a new “super deduction” mega tax break will be introduced for companies that invest in technology.
Bosses will be able to slash their tax bill by a whopping 130 per cent over the next two years under the scheme.
That is ten times bigger than the business tax breaks brought in after the 2008 recession.
It will encourage big manufacturing companies to stay and invest in Britain.
Professor Sir Charlie Bean, of the OBR, said most of the consumer boom would come from lockdown being lifted.
He said: “The key reason the savings ratio comes down sharply and consumption bounces back is you are removing restrictions on the economy.
“You are allowing people to go out and spend. It’s the reopening that allows the economy to bounce back.”
But he warned against assuming the 2020s will see growth on a par with the 1920s.
Better-off households may be loath to part with their pandemic savings on the high street, Prof Bean added.
Income tax rises
MILLIONS of hard-working Brits will be hit by a stealth tax rise.
Chancellor Rishi Sunak froze personal allowances — the amount you can earn before paying income tax — after this April until April 2026.
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This year, the basic rate taxpayer threshold will be £12,570, and £50,270 for higher rate tax payers.
It is understood about two million low-earners will lose out under the policy, which will raise £20billion for the Treasury.
Labour leader Sir Keir Starmer said: “On public sector pay, many are going to be hit by the pay freeze and by a stealth income tax rise through the freezing of the tax allowance.”
Tech tax axe
A RADICAL tax break will incentivise businesses to invest in new kit.
The super-deduction will cut taxes by up to 25p for every pound companies spend on plant and machinery.
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The move, for two years from April, aims to help 100,000 small businesses buy better tech and be more productive — giving the economy a £25billion boost.
PwC director Portia Pierrel said: “These measures will be welcomed by businesses.”
Green bond
BRITAIN is to get a sovereign green bond to fund projects that help tackle climate change.
The move is intended to generate £15billion of investment.
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Another £12billion will finance green industry through the first UK Infrastructure Bank in Leeds.
A further £68million will go towards a competition to create energy storage technology, plus £20million for floating off-shore wind projects.
The Green Homes Grant was not mentioned.
Self-employed grants
MANY more self-employed people will be able to get Government grants.
The Treasury said 600,000 extra people would be eligible for help if they had already filed a tax return.
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They missed out on previous aid as they had not been working for themselves long enough.
Two further grants worth up to a maximum of £7,500 a quarter will be available.
As the economy reopens, those whose turnover has fallen by a third or more will get full grants. Others will not be able to claim as much.
It takes the total spend on the self-employed to £33billion but critics said there were still millions of people not eligible.
Business tax
BIG corporations will foot much of the Covid bill with the rise in corporation tax to 25 per cent from April 2023.
The rate, lower than any other G7 nation, will raise £47.6billion by 2026.
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Those making less than £50,000 profit will stay at 19 per cent.
Paul Johnson, from the IFS, said the rise was a “significant risk” and the biggest reversal in policy for decades.
Experts fear larger companies will put up prices to pay for it.
Furlough
WORKERS on furlough will continue to get 80 per cent of their wage paid for another six months.
The payment scheme will have lasted almost 18 months by the time it finishes in September.
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Larger employers must contribute ten per cent in July and 20 per cent from August.
The Chancellor said he was “proud” of the scheme.
The Office for Budget Responsibility said his package of extra help would prevent 340,000 jobs from being lost.
Universal Credit
MILLIONS on Universal Credit will get an extra £20 a week for another six months.
Chancellor Rishi Sunak said the move would help the lowest paid and most vulnerable well beyond the end of lockdown.
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It means people on Working Tax Credits will get a one-off £500 payment in April.
Citizens Advice, said the extension would be a huge relief but claimed it only “kicks the can down the road” — leaving millions facing a financial cliff-edge in the autumn.
Labour called for an extension of at least a year and the axing of Universal Credit.
Billions for the ‘Red Wall’
RISHI Sunak wooed Red Wall Tories last night as he promised them billions in tax breaks and investment.
The Chancellor vowed to “level up” Britain’s old industrial heartlands by turbocharging growth across the North and the Midlands.
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He said parts of the Treasury will be moved to a new campus in Darlington — a seat that went Tory at the last election for the first time in 30 years.
And a new Infrastructure Bank will be set up in Leeds.
More than £1billion will go to 45 towns — many across the North and the Midlands.
And “ultra-low tax” free ports will be created to kickstart a manufacturing boom.
A new “super deduction” mega tax break will come in for firms that invest in qualifying machinery and tech.
It will allow bosses to slash their tax bill by 130 per cent over the next two years.
Treasury boffins reckon this will help to keep car manufacturers and other big employers in Britain.
Tory MP Jake Berry, who chairs the Northern Research Group, hailed the news as “a day for the North”.
Pensions stealth tax
RISHI Sunak was accused of more stealth taxes after freezing the inheritance tax and capital gains tax thresholds and the pensions lifetime allowance.
The move will raise more than £2billion but will hit investors, the retired and the grieving.
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TAXING TIMES
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Nigel Peaple, of the Pensions and Lifetime Savings Association, said the lifetime allowance freeze would drag thousands into the Treasury tax net.
The Chancellor would not say whether the capital gains tax threshold would rise in future.
But he said he had stuck to Tory manifesto pledges, adding: “That is important to me.”
Rishi Sunak vows to use Budget to build ‘fairer and more just country’ in memory of those lost to Covid
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