Charlotte Street Partners



The budget balancing act

Written by Li-Ann Chin, associate 
Edited by Tom Gillingham, associate partner
2 March 2021

Good morning,

Chancellor Rishi Sunak will unveil his 2021 budget on Wednesday afternoon, which has been billed as the second half of the prime minister’s roadmap out of the Covid-19 lockdown.

There is no denying that the pandemic has taken its toll on the economy. Figures from the Office for National Statistics (ONS) indicate that national unemployment has risen to 5.1%, its highest level since 2016. In January, it was reported that Britain was on course to borrow a record £450bn this year, driving the budget deficit to about 21% of the GDP this year – by far the highest level since World War II.

With the stakes so high, here’s a recap of what we know so far:

Most sources opine that the government’s key support measures – furlough, business rates relief for retail and hospitality industries, a lower VAT rate for restaurants and pubs – are likely to be extended at least until the end of June. A £5bn rescue fund will be offered to shops, pubs, restaurants, hotels and other non-essential businesses. A £520m scheme to provide training, support and advice for small to medium sized enterprises has also been confirmed.

In line with what Scotland’s finance secretary Kate Forbes has called for, the £20-a-week uplift to universal credit payments is reportedly set to be prolonged until September.

Given the current fiscal situation, limited tax rises will be expected. The chancellor is poised to raise the rate of corporation tax from its current 19%, while ensuring it remains competitive with other G7 countries. The rates of income tax, value added tax and national insurance are likely to remain unchanged – but the government could introduce alternative means of securing more revenues from this area.

Come Wednesday, Sunak will confirm an extension to the stamp duty holiday in England, as the property industry rallies behind a staggered three-month drop off. The government is also set to launch new five percent deposit mortgages, enabling lenders to offer mortgages worth 95% of the purchase price on properties valued up to £600,000.

Green savings bonds will similarly be unveiled, which the Treasury has stated will be made available to retail investors. Media reports suggest that he will launch a new net-zero innovation portfolio of finance totalling £1bn.

Today, Sunak announced a £408m fund to help museums, theatres and galleries in England reopen once Covid restrictions ease. An additional £150m has also been earmarked to help communities bid for their local pubs. Rumours about the revealing of freeports or special economic zones – which Sunak once championed as a backbench MP – abound, as more information on the government’s ‘levelling up’ manifesto commitment is expected.

Now, we wait.

We’ll be analysing the budget and specifically its implications for Scotland in more detail tomorrow. If you would like to receive this on a one-off basis, please email


Nicolas Sarkozy, the former French president, was sentenced to a year in prison and a two-year suspended sentence yesterday, after he was convicted of trying to bribe a judge to gain information. The first corruption conviction of a modern French president has dealt a blow to Sarkozy’s hopes of a return to the political front line. (£)
Health secretary Matt Hancock unveiled new data that indicated single shot of either the Oxford-AstraZeneca or Pfizer-BioNTech vaccine is more than 80% effective at preventing hospitalisation among the over 80s. The fact that the number of hospital admissions is falling faster than that of cases – particularly among the older age groups – is a sign that the vaccine is working, he said.
Myanmar police have fired stun grenades to disperse protesters in the city of Yangon, witnesses said, as foreign ministers of neighbouring Southeast Asian countries are due to hold talks with the military today in an effort to quell the deadly violence. It is reported that least 21 protestors and one policeman have been killed since the turmoil began.

Business and economy

According to official numbers from the Department for Work and Pensions analysed by the BBC Shared Data Unit, parts of the UK reliant on tourism have been most affected by the pandemic, with around three out of five people who began claiming Universal Credit at the outset of the pandemic still doing so six months later. Areas with the highest proportion of claims include London, north and west Wales, north-east Yorkshire, Scotland and parts of Cumbria.
Latest figures by the Bank of England (BoE) indicate that households deposited an additional £18.5bn in bank accounts in January, significantly above the £4.8bn monthly average for the six months to February 2020. According to the BoE, limited spending opportunities as a result of lockdown may well increase the reserves that can drive recovery once the economy reopens. (£)
Deputy first minister John Swinney has agreed to release key legal advice from its court battle with Alex Salmond under the threat of a ‘no confidence’ note from MSPs. The inquiry committee is to take evidence from Lord Advocate James Wolffe – the government’s top legal advisor – today, with first minister Nicola Sturgeon set to follow on Wednesday.

Columns of note

In The Guardian, Anneliese Dodds, shadow chancellor of the exchequer argues that measures introduced in the 2021 budget will be insufficient to address societal issues stemmed from a decade of economic negligence.
Last week, Boris Johnson said he was confident that workers would return to offices “in a few short months” once covid-19 restrictions are lifted. Don’t bet on it, says Hugo Rifkind, in his piece for The Times.

Cartoon source: The Telegraph


What happened yesterday?

London stocks finished in positive territory on Monday, as bond markets recovered, and housebuilders led the advance on the back of news of a likely extension to the stamp duty holiday, combined with expectations of a mortgage guarantee in tomorrow’s budget.

Crest Nicholson jumped 6.35%, Taylor Wimpey rose by 5.68%, Persimmon was up by 5.37% and Berkeley Group added 5.23%.

The FTSE 100 ended the session up 1.62% at 6,588.53, and the FTSE 250 was ahead 1.49% at 21,221.46. Sterling was stronger as well, last rising 0.06% against the dollar to trade at $1.3942 and gaining 0.26% on the euro to €1.1570.

Notably, figures from the BoE showed mortgage borrowing remained strong at £5.2bn in January and households continued to pay off debt amid economic uncertainty. The value of mortgages approved dipped from December’s figure of £5.6bn and the number of house purchase approvals fell to 99,000 from 102,800.

Across the Atlantic, Wall Street stocks closed sharply higher as Treasury yields retreated from last week’s highs and some positive vaccine news helped boost sentiment among investors. At the close, the Dow Jones Industrial Average was up 1.95% at 31,535.51, while the S&P 500 was also up, by 2.38% to reach 3,901.82 and the Nasdaq Composite ended the session 3.01% stronger at 13,588.83.

In company news:

Swedish fintech Klarna has confirmed it is targeting acquisitions and looking to capitalise on the surging demand in the US, following the $1bn of investment it recently raised.

Trustpilot unveiled plans to list in London and is reportedly looking to secure a market value of about £1bn.

What’s happening today?

Apax Glb
Dalata Hotel Gp
Flutter Ent
Interek Group
Robert Walters
Signature Aviat
Taylor Wimpey
Travis Perkins
Uniphar Plc
Xp Powe

Bluefield Solar
Hotel Choc
Renalytix Ai
Supermarket Inc

Q3 Results
Ashtead Group

UK economic announcements
(07:00) Nationwide House Price Index

Int. economic announcements
(07:00) Retail Sales (GER)
(08:55) Unemployment Rate (GER)
(20:30) Auto Sales (US)

Source: Financial Times

did you know

The longest Budget speech was four hours 45 minutes by William Ewart Gladstone in 1853, during which he was fortified by a potent mix of egg and sherry. The previous year Benjamin Disraeli spoke for almost the same length of time, a speech delivered under the influence of milk.

Parliamentary highlights

House of Commons

Oral questions
Foreign, Commonwealth and Development Office (including topical questions)
Urgent question
To ask the Secretary of State for Foreign, Commonwealth and Development Affairs if he will make a statement on the levels of funding in aid to Yemen – Mr Andrew Mitchell
Ministerial statement
Covid-19 update – Matt Hancock
Ten Minute Rule Motion
Banking Services (Post Offices) – Duncan Baker
Motions to approve the Draft Pneumoconiosis Etc. (Workers’ Compensation) (Payment Of Claims) (Amendment) Regulations 2021 and the Draft Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2021 – Justin Tomlinson
General debate
Covid-19 and the Cultural and Entertainment Sectors
Statutory sick pay levels and the covid-19 outbreak – Richard Burgon

House of Lords 

Lord Khan of Burnley
Oral questions
Private Notice Question
To ask the government what assessment they have made of the risk of the P.1 Brazilian variant of Covid-19 – Baroness Thornton
Order and regulations
Economic Partnership Agreement between the UK and Kenya – Lord Goldsmith

Scottish Parliament 

Topical questions
Ministerial Statement: COVID-19
Ministerial Statement: Scottish Parliamentary Elections 2021
Stage 3 Proceedings: Defamation and Malicious Publication (Scotland) Bill
Standards, Procedures and Public Appointments Committee Debate: Code of Conduct Rule changes – Treatment of Others
Scottish Parliamentary Corporate Body Debate: Reimbursement of Members’ Expenses Scheme

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