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What London needs from the Budget
1 March 2021
Rishi Sunak delivered his first Budget less than a month into his Chancellorship and only a fortnight before the first national lockdown. The twelve months since have been some of the most extraordinary in living memory, with more than 120,000 deaths, unprecedented personal and economic restrictions, plummeting GDP, rising unemployment, and an equally extraordinary public spending response.
This week, he will deliver his second Budget against the backdrop of these challenges. Even with recent growth, the economy is still 8% smaller than it was before the pandemic; even with the furlough scheme, 1.7m people are unemployed; and the bill for the Covid response stands at £250bn and rising. Unemployment is 6.9% in London, higher than any other region in the UK, with the young and BAME communities disproportionately affected.
With the vaccine rollout working, we are edging closer to a turning point where restrictions can start to be wound down and the recovery can begin. However, London businesses need both parts of this transition to be well-planned and coordinated: restrictions and support cannot be removed too early and measures must be taken to aid and encourage recovery, not hamper it. Until we reach the unlocking that is on the horizon, furlough and self-employment support schemes must be extended, rather than allowing these workers to fall away into unemployment and economic hardship.
The pandemic’s effect on central London has been particularly serious. Being hit hard and early, 2020 saw combined overseas and domestic tourist spending down £10.9bn and commuter spending down a further £1.9bn. According to the GLA, in the worst-case scenario with continued, repeated lockdowns, 97% of the economic output of West End could be lost. To ensure the capital can play an important role in returning the UK to growth, it is critical that the Budget adopts policies that will help the Central Activity Zone get back on its feet: restoring tax-free shopping for tourists, extending Sunday trading hours in the UK’s international centres, and extending the business rates holiday and VAT relief throughout 2021.
For the jobs that will not return and for the new jobs of the future, there needs to be a focus on reskilling and upskilling people at all stages of their careers, so they can move quickly and affordably into new roles. To help lower employment and training costs for businesses, the apprenticeship levy should be reformed alongside other measures, such as temporarily freezing any increases to the national minimum wage, national insurance payment holidays, and training tax credits.
Young people entering the workforce for the first time over the coming years present a huge economic opportunity, but they too need help now. Supporting children – especially disadvantaged children – who have missed out on so much education is critical. And in addition, Government should work with business to scope out a programme of work experience placements that will help them as they start to look ahead towards their working lives.
This Budget could pave the way for a strong bounce back, securing the UK’s place as a post-Covid economic hub. However, if the Chancellor misses this opportunity, the recovery could stall, businesses could fail, and people’s personal financial situations be significantly damaged. We are at an economic turning point, and London business will be watching.
You can find London First’s full Budget submission here.
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