Anne Marie Waters
Tuesday 23rd February 2021
Boris Johnson has announced plans to move the country out of lockdown. Provided all goes well with the opening of schools and the allowance of outdoor social mixing in March, some businesses may re-open in mid-April. The plan is for all restrictions to be lifted by June 21st. This can only be good news, especially for the economy, and signs of life are already beginning to show.
While of course businesses would rather re-open sooner, and there are still many weeks to go (and the dates given are ‘at the earliest’), the BBC reports this morning that more than half of UK firms plan to hire new staff in preparation. The Chartered Institute of Personnel and Development (CIPD) has surveyed 2,000 businesses and found that 56% intended to hire in the first few months of the year. It also found that the number of firms planning redundancies had dropped from 30% to 20%.
However, as it stands, unemployment continues to rise. The UK unemployment rate now stands at 5.1%.
In his budget report next week, it is expected that the Chancellor will extend the government’s furlough scheme in to the summer, which will help businesses in the shorter term but may mean higher taxes in the longer term. The level of government debt is also at a staggering level.
According to the BBC:
The latest figures are eye-watering. Government borrowing for this financial year has now reached £270.8bn – £212.7bn more than a year ago, according to the Office for National Statistics (ONS).
This has pushed up the national debt to £2.13 trillion – the equivalent of 99.4% of gross domestic product (GDP), which is the value of goods and services produced in the economy, a level not seen since the early 1960s.
This debt will need to be paid somehow and taxes seem to be the default position.
The government can raise money by increasing taxes.
However, the 2019 Conservative manifesto pledged not to increase the three main taxes – income tax, National Insurance or VAT.
On the other hand, this was before the pandemic, and the chancellor could argue that changed circumstances have forced a change in policy.
There are other options of course, such as tax cuts rather than tax rises. Tax cuts will reduce pressure on businesses and put more money in to the pockets of consumers, which will ultimately lead to economic growth and greater tax income for the Treasury. We can also do what is both necessary and moral, and a core policy of For Britain – target and reduce waste in the public sector.
Elsewhere, house prices are going up; good news for sellers, not so good for buyers in an economy where housing was already out of the reach of many prior to the pandemic.
UK house prices climbed 8.5% in 2020, the highest annual growth rate since October 2014, according to official figures.
The average UK house price reached a record high of £252,000 in December 2020, the Office for National Statistics said.
The North West had the highest growth of 11.2%, while London rose just 3.5%.
The current increase is said to be fuelled largely by home improvements prompted by lockdown, but housing in Britain is already too expensive for millions thanks largely to mass immigration, something this government is not only refusing to reduce, but will continue to increase.
There may also be trouble in store for renters. There is a currently a ban on evictions, that has been extended to the end of March, but when that ends, nobody knows what the result will be. Organisations and charities in this area are warning of the prospect of mass evictions in the near future as 750,000 people have fallen behind on rent during the COVID crisis.
Overall, as so often since the pandemic began, the economic picture is mixed. Unemployment is high but there are signs that a potential boom when businesses reopen are painting a more positive picture. However, it’s still likely to take some time to get back to pre-pandemic levels as people are unlikely to rush back to city centres immediately due to fears of the virus.
Housing and homelessness remain an enormous issue and there isn’t much positive in the pipeline in this regard. Similar can be said about debt and taxation; we don’t yet know what is to come.
The end of lockdown is obviously a positive, and will boost the country, but we are still teetering on the edge. The government needs to get its taxation policies right, or we could still be facing economic catastrophe.
Anne Marie Waters
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