Budget 2021 – Young Money comments

It’s Budget Day, with chancellor Rishi Sunak announcing his three point plan earlier to support businesses through the remainder of the pandemic, “fix” the public finances and build the future economy. Iona takes a closer look at what was (and wasn’t) said…

EMPLOYMENT

I’m glad to see incentives to take on apprentices being increased to £3000 to boost the effort to build a more practical, skills-based economy. This is going to be essential for driving the kind of domestic growth that will help make up for the damage caused by Covid-19 restrictions and lockdowns. But it remains to be seen how widely this will be adopted as we come out of (hopefully) the final lockdown, as the Kickstart Jobs scheme to provide money for employers taking on young workers has yet to, well, kick start. Don’t forget that the rise in National Living Wage won’t apply to anyone aged 21 and under.

ECONOMICS

I had mixed feelings about the extension of the furlough scheme, as well as the introduction of restart grants and recovery loans for businesses as they re-open. These announcements provide a bit more reassurance for employees who have had a sword of Damocles dangling over their heads. But it was telling that hospitality businesses would qualify for more funding – £18,000 – as they would be “impacted more by restrictions”. This is the clearest indication yet that we’re due for anything but a normal British summer, despite the vaccine roll-out, with distancing, limited numbers and possibly even immunisation passports dampening down activity. I’m just hoping that the money provided today will be enough to get these businesses back on track but I fear a ‘new normal’ will mean quieter high streets and fewer jobs for young people long-term, with hospitality and retail businesses being big youth employers.

HOUSING

The 95% mortgage guarantee is a depressing extension of existing housing policy, and we could have done with some more fresh thinking about the solutions to our housing crisis. It’s widely accepted that the Help to Buy Equity loan scheme has been a failed policy, pushing up housing prices and giving house-builders free rein to flog badly-built, overpriced homes to desperate young people. But I’m not surprised that we’re just getting more of the same: if you wait for governments to overhaul planning policy and introduce effective rent-friendly policies, you’ll be waiting a bloody long time.

TAXES

People probably don’t grasp how much the freezing of tax thresholds will affect their pensions and investments in the long run, but that’s kinda the point, isn’t it? Most of these tax freezes will concern higher earners’ pension and investment plans, but make no mistake: keeping the personal allowance at £12,570 for longer in reality means many more people will pay tax (including lower earners) as wages rise in lockstep with inflation. Whether this is the right thing to do as we try to grow our way back to pre-Covid economic health remains to be seen.

SAVINGS

Why the hell is the Lifetime Isa’s exit penalty not being permanently reduced, given the high chance that young people will have to fall back on their first-home savings if they’re made redundant over the next year? I wrote about this for i News today: this issue is not going away anytime soon and the Treasury missed an easy opportunity to significantly improve a youth-focused product and make the savings landscape far more flexible and relevant to young people today.

Finally, green retail bonds sound sexy and progressive, but I am curious to see how these will be structured and sold. I am definitely all for innovation in the retail saving and investing market but let’s hope the risks of these products will be carefully managed if millions of folks are expecting iron-clad, higher returns than on their savings.”

Iona will be unpacking the chancellor’s speech in more detail alongside Budget veteran Simon Bain in a special edition of the Own It! podcast, which you can hear tomorrow evening. Subscribe on Apple or follow on Spotify so you catch it as soon as it lands!

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