Everyone is concerned with predictions for the budget, but whether we like it or not we (collectively) need to pay back the £394bn that the Government have borrowed over the last year.
£280bn has been spent supporting businesses and public services across the UK, and whilst there have been significant gaps in support in some areas, on a macro level the stimulus has helped keep people in jobs and businesses trading throughout the many lockdowns in the last 12 months.
How would I have done it?
Hindsight is a wonderful thing and as is back seat driving, you see all of the things heading your way and would have done things differently…
Honestly, I do not envy Rishi his first year in office, with a 2019 manifesto that promised to keep taxes low and the lack of foresight to factor into his cashflows the need to borrow the highest ever figure since wartime I can imagine there have been more than a few sleepless nights in the last year.
The debt needs to be re-paid!
The roadmap has been set out for us to resume all normal activity from 21st June 2021, which calls time on the support that has been flowing relatively freely and the focus now needs to turn to how the debt will be repaid.
With £73bn lent in CBILS, CLBILS and BBLS, figures are being bandied about that up to 60% of these loans will go into default – The article I’m referring to looks at BBLS specifically, and in this instance would equate to £27.6bn.
The figures are astronomical, but when you break it down and look at the ways in which Rishi can start to recoup some of the money, they start to look a little more manageable (She says!).
In reality, the majority of the money has been spent on businesses protecting jobs and paying workers wages. Whether we agree wholeheartedly in the ways in which it was done, done it is and so it is with much certainty that it is going to fall at the doors of the businesses and the workers to make the repayments…Us (Collectively!).
How do we pay it all back?
- Increase in Corporation Tax? - Did you know that just a 1% increase would generate over £3bn in income for the Government?
- Loan Repayments? – Pay As You Grow and strict enforcement of non-repayment of loans would make some sense, we’ve had the money, now we need to pay it back!
- Who knows?
I am not an economist or a tax specialist, but I am a business owner, employer, director of a company, shareholder, consumer and I have witnessed the positive impact that the stimulus has had over the last 12 months.
We got through the pandemic together and we will also get out of it together. Rishi has a thankless task tomorrow in that whatever he does, it will be wrong…But I for one will just be waiting to see what the budget brings and then making the best effort plans to manage my personal and business finances in such a way that takes the budget into account.