After a year of economic turmoil, today saw what’s been billed as one of the most important Budgets for a generation. Here’s what it means for YOU.
It’s been a tough year for so, so many reasons, and alongside the devastating effect the coronavirus pandemic has had on our collective mental and physical wellbeing is the impact it’s had on our finances.
While nobody has been able to escape the difficulties of the last 12 months, the consensus among the experts seems to be that young people will pay the greatest economic toll – be that through the loss of work now, or the lack of opportunities in the future.
But, with the light at the end of the COVID tunnel seemingly closer than ever, today’s Budget was an opportunity for the government to outline how we can make it out in one piece and, hopefully, bounce back even stronger. So, did they deliver?
Budget 2021 explained
What is the Budget?
The Budget is an annual event that sees the Chancellor provide the nation with an update on the country’s finances, as well as announcing the government’s plans for taxation and spending in the year ahead.
In 2020, the Budget took place as the coronavirus pandemic was beginning to take a grip on the UK, and the Chancellor, Rishi Sunak, promised billions of pounds to combat the virus.
However, within a couple of weeks, the country was in a full lockdown, and Sunak quickly had to announce a whole host of extra measures (including the furlough scheme) to see the country through the following months.
While we couldn’t rule anything out, it seems as though (touch wood) things are heading in a better direction this time around. Hopefully, things won’t take a significant change for the worse in the next few weeks and once again require what felt like a second Budget.
No extra support for students
It feels slightly odd to be starting a summary of the Budget with something that wasn’t in it but, for students across the country, there was a glaring omission from the Chancellor’s speech.
Despite calls from students, politicians and countless others, including all of us here at Save the Student, Rishi Sunak failed to announce any extra funding to support people at university who have been affected by the coronavirus pandemic.
As revealed by our recent National Student Accommodation Survey (NSAS), students have so far wasted an estimated £1 billion this year on accommodation that they’ve been unable to access due to lockdown restrictions.
While some may argue that this is money students would have spent on their accommodation either way, it’s important to remember that the industries people usually work in while at university (like hospitality and retail) are also those that have been hardest hit by coronavirus.
Couple that with the thousands of parents who have been placed on furlough or lost work, and have therefore been unable to provide the financial contributions they have in the past, and it’s clear that students are facing a perilous set of circumstances.
In fact, the most recent of our two surveys on the impact of COVID-19 on students found that almost half of those polled worry about money in relation to the pandemic. Among other things, some students are making up for this lost income with credit cards, gambling and sex work.
Now, the government did recently announce an extra £50 million of hardship funding for students in England. But, as NUS Vice President for Higher Education, Hillary Gyebi-Abadio, noted in our NSAS, if the government were to match the funding-per-student being made available in Wales, this amount offered would have to be more than £700 million.
Whether it’s lockdown announcements or the promise of face-to-face teaching in this academic year, students have felt ignored and taken for granted throughout the pandemic – and today’s announcement (or lack thereof) just feels like history repeating itself.
The minimum wage is going up
It’s fairly standard for the minimum wage to rise at the start of the new financial year (every April). Thanks to coronavirus, inflation rates in the UK are low, so the increase in the minimum wage is also pretty modest.
These figures had already been announced, but the Chancellor has today confirmed the following changes to the UK minimum wage, effective as of April 2021:
|Age||Current minimum hourly wage||New minimum hourly wage|
|23+ (National Living Wage)*||£8.72||£8.91 (+2.2%)|
* Before April 2021, the National Living Wage only covered those aged 25 and above.
Is this good news?
It’s only a small increase, but any amount of extra money is still extra money – although, of course, it’s tied to inflation, so really it’s just helping you to cover the increased cost of living in the UK.
The extension of the National Living Wage to cover those aged 23 and 24 is also a welcome move, and offers some glimmer of hope to students and graduates facing one of the trickiest job markets for a generation.
And just a reminder that, whichever age bracket you fall into, it’s always worth checking your payslip that your employer is respecting your employment rights and paying you accordingly.
Tax thresholds are being frozen
Although you may not be paying it right now, it’s worth being aware of what the state of play with income tax is.
Up until the last Budget, the threshold for paying income tax rose steadily to its current level of £12,500 (all money earned before this is tax-free and known as the Personal Allowance). As wages typically increase year-on-year, this annual change was designed to ensure lower earners wouldn’t feel as significant a hit from the extra tax they’d pay.
However, while this year’s planned increase to £12,570 is going ahead in April, the Personal Allowance will then be frozen at that level until 2026. This means workers will essentially end up paying more income tax as their earnings inevitably rise.
Is this good news?
Imagine you earn £20,000 a year. With the new income tax threshold of £12,570, you’d only pay tax on £7,430 you earn above it.
Now, let’s imagine your salary rises to £21,000. Had the Personal Allowance risen to, say, £13,000, you’d now be paying income tax on the £8,000 you earn above it – you’re still paying more in tax, but less than if the threshold hadn’t risen.
But with the Personal Allowance frozen at £12,570, there’s nothing to soften the blow – in this scenario, you’d now be paying tax on the £8,930 you earn above the threshold. While this isn’t technically a tax hike, it will likely lead to most workers paying extra income tax – especially as the freeze is in place for five years.
Of course, the basic rate of tax is only 20%, and with pay packets unlikely to grow too much in difficult economic times, it’s only likely to have a small impact on your take-home salary. And let’s not forget that tax helps to pay for all the public services that we’ve relied upon not just during the pandemic, but throughout our lives.
However, precisely because we’re in difficult economic times, many people would argue that doing anything to add to the financial concerns of the lowest earners is unfair – particularly as this demographic has already felt the effects of the last year more than most.
Furlough scheme extended until September
The Coronavirus Job Retention Scheme, better known as the ‘furlough scheme’, has been with us for almost a year now.
Announced as businesses across the UK were forced to close in the first lockdown, the programme allows employers to claim a grant from the government to cover up to 80% (up to £2,500 a month) of an employee’s wages if coronavirus restrictions mean they’re unable to work.
Initially, the furlough scheme was only set to run until the end of May 2020 but, following several extensions, the latest expiry date was 30th April 2021. However, the Chancellor has today announced that it will now expire at the end of September 2021.
Is this good news?
In the past, the extension of the furlough scheme – while totally welcome – has felt a little bit ominous. We’d never known a world where having people furloughed didn’t mean restrictions on everyday life, so extending it was always a sign that we still had a long way to go before returning to normality.
However, with the government’s roadmap out of lockdown suggesting that there will be some restrictions until mid-June at the earliest, it only makes sense to keep the furlough scheme until at least then.
But why has Rishi Sunak decided to go further and extend it until the end of September? Well, there are two things to consider here.
Firstly, the fabled 21st June ‘end of lockdown’ date is actually just the earliest point at which the final restrictions could be lifted. Although we’re all hoping it comes to pass, there’s a chance that the virus will still pose too great a risk at this point to return to normality. So, just in case, it’s wise to have the furlough scheme in our back pocket.
But, more importantly, extending the programme until the end of September also allows businesses extra time to get back on their feet. Many experts feared that if furlough ended after June, we’d be faced with a wave of unemployment as businesses couldn’t afford to suddenly bring everyone back.
Some high-profile figures have argued that the furlough scheme should be extended even further, perhaps even to 2022. Whether or not this will happen remains to be seen but, in the meantime, an extension to the end of September is a welcome move.
Universal Credit boost to be extended
Among the other measures taken at the start of the pandemic to reduce its economic impact was a temporary increase in Universal Credit payments.
Today, the Chancellor pledged to extend the payment of this extra £20 a week for an extra six months, running to the end of September.
Is this good news?
For a while now, people claiming Universal Credit and charities representing those on low incomes have been campaigning for the government to extend the uplift in the payment – either for several more months, or indefinitely.
The extra £20 a week has proved invaluable to families across the UK and, according to the anti-hunger charity, Trussell Trust, it has helped millions of people pay for basic necessities like food. The trust also suggested that, had the additional payments been cut, hundreds of thousands of parents would have to cut back on food for their children.
In fact, analysis by Citizens Advice Scotland found that without the extra £20 a week, Universal Credit payments would actually be worth less than they were in 2013 (accounting for inflation).
So, despite many arguing that Universal Credit payments still aren’t enough to support those who need it, and that this boost should become a permanent fixutre, it’s definitely good news that the £20 uplift isn’t being scrapped just yet.
The contactless limit is rising to £100
Last year, to reduce the risk of spreading coronavirus via cash and chip and PIN keypads, the contactless limit was raised from £30 to £45.
This has accelerated the move away from cash and, following a consultation, it’s been announced that you’ll soon be able to spend up to £100 in a single contactless transaction.
Is this good news?
While we all love the convenience of paying via contactless, some people have legitimate concerns over the safety of increasing the limit by such a significant amount. What happens if someone steals your card and tries to go on a spending spree?
Well, figures suggests that when the limit was raised at the start of the pandemic, the rate of contactless fraud only increased by a very marginal amount.
What’s more, the current limit is still in place that requires you to enter your PIN after five consecutive contactless payments, and the amount that can be spent across those payments will be capped at £300 (i.e. still lower than five payments of £100).
Of course, £300 is still a lot of money to lose. There have been calls from some to allow people to set their own contactless limits, up to £100, which would certainly go a long way to reducing the anxiety about such an increase.
But until such a change is introduced, you may need to keep a closer eye on your bank card than ever before.
A freeze on all alcohol duties
As you may or may not know, beer, wine, cider and spirits are all subject to taxes by the government.
These taxes (or ‘duties’, as they’re also known) don’t just raise money for the government – they’re also considered to be a way to discourage people from binge drinking. After all, you’re less likely to get that seventh pint if it’s going to hit your student bank account harder than your head.
However, following the toughest year that pubs have arguably ever faced, the Chancellor has frozen all alcohol duties – just as he did last year and the then-Chancellor, Phillip Hammond, did in the Budget before that.
Is this good news?
For those of you that drink, a freeze on alcohol duty will certainly help you save money on a night out. And for pubs, which for most of the last year have either been closed or operating at a reduced capacity, this will hopefully bring in some much-needed cash.
A freeze on fuel duty
It’s not just alcohol that’s subject to duties – fuel is too.
For the past decade, fuel duty has been frozen and, despite a planned increase this year, the Chancellor has frozen the rate yet again.
Is this good news?
In purely financial terms, this is a boost to drivers – an increase to fuel duty would have meant filling up your tank would cost more each time. So, by freezing it, you’ll hopefully save some money on driving.
However, many believe that if the government is serious about tackling climate change, it should be discouraging people from using personal cars, especially those that use petrol or diesel.
An increase in fuel duty would be a step towards that and, as noted by the Green Party MP, Caroline Lucas, the freeze comes as rail fares continue to rise – despite public transport being a greener alternative to owning and using your own car.
So, whether or not a freeze on fuel duty is good news totally depends on what your own priorities are.
Frustrated by the disruption that coronavirus has caused to your university experience? Here’s how to claim compensation.