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Budget 2021: Furlough set to be extended – Kwasi Kwarteng

Business support including furlough and the VAT cut for hospitality firms will continue “while lockdown persists”, the business secretary has said.

With Covid restrictions set to end by June at the earliest, Kwasi Kwarteng told the BBC it was important not to “crush” any potential recovery.

And there was “every chance” the economy would “bounce back” in the second half of the year, he added.

Chancellor Rishi Sunak will set out his plans in the Budget on Wednesday.

He is expected to announce £408m of help for museums, theatres and galleries in England to reopen when Covid restrictions ease, and pledge £150m to help communities take over pubs in danger of closing.

But Mr Sunak faces a potential row with some Conservative MPs if he imposes any tax rises, amid warnings they could stifle economic growth.

And Labour is urging him to abandon the planned council tax rises England.

The Budget – happening almost a year after the first coronavirus lockdown started – comes at a very difficult time for businesses and government finances.

Official figures show the UK economy contracted by 9.9% last year and unemployment rose to 5.1% in the three months to December – the worst rate since 2015.

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With its takings down and its spending up, the government is expected to borrow £394bn during the current financial year – the highest figure seen in peacetime.

The furlough scheme, currently paying up to 80% of six million people’s salaries, is scheduled to stop at the end of this month.

But the prime minister’s “roadmap” for easing Covid restrictions says the final legal limits on social contact and business activity will end no earlier than 21 June.

What factors could shape Rishi Sunak’s thinking in his 2021 Budget?

Asking on BBC Breakfast if the job support scheme would be extended, Mr Kwarteng said: “I think the Chancellor has already indicated that we will be extending furlough, I think that has been part of a public announcement.”

And on BBC Radio 4’s Today programme he said: “I think it’s a fairly good assumption that, while lockdown persists, there will be additional support.”

He added: “It’s really important that we don’t crush the recovery before it’s happened and… in order to keep people’s jobs going… to keep companies going, we need to continue providing support.”

Mr Kwarteng said there would “perhaps be an extension” of the reduced – 5% – rate of VAT for the hospitality sector, also due to end in 31 March.

If vaccines continued to be rolled out “efficiently” and the roadmap was followed, there was “every chance that the economy can bounce back”, he argued.

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“We can see strong growth at the end of 2021, and that will be the best way to deal with the growing deficit or to try and reduce it,” Mr Kwarteng said.

The chancellor will promise help to save endangered pubs

Mr Sunak is reportedly planning to increase corporation tax to as much as 25%, from the current 19% to reduce pressure on public finances.

But some Conservative MPs, including former Brexit Secretary David Davis, say this would impede recovery and are warning they will resist this or any similar moves. They have been told they risk expulsion from the parliamentary party if they vote against the Budget.

Mr Sunak said the culture sector, employing 700,000 people, would be a “significant driver” in any recovery, as the country follows the prime minister’s “roadmap” for reducing Covid restrictions.

He is expected to put an extra £300m into the £1.57bn Culture Recovery Fund, with England’s museums and cultural bodies also receiving £90m to keep going until they can open their doors on 17 May at the earliest – plus £18.8m provided for community cultural projects.

And £77m will go to the devolved administrations in Scotland, Wales and Northern Ireland, allowing them to provide culture groups with similar backing.

The chancellor will also use his Budget speech to deliver a £150m Community Ownership Fund so communities can bid for up to £250,000 to save pubs and sports clubs in danger of going out of business.

But former Conservative leader Lord Hague warned that, after 12 months of heavy public borrowing to pay for furlough and other schemes, taxes would have to rise.

Writing in the Daily Telegraph, he said: “It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up.”

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For Labour, shadow chancellor Anneliese Dodds used a speech on Monday to argue that now was “not the time” for tax rises, but signalled she could support an increase in corporation tax in the future.

Labour had previously said it would oppose this if it came up in the Budget.

Ms Dodds has said the planned council tax rise of up to 5% in England in April should not go ahead at a time “when people are losing jobs”.

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