Rishi Sunak will rise in the House of Commons to deliver his Budget today knowing that months of work have gone into attempting to juggle two contradictory demands.
The Chancellor wants to continue supporting millions of people and businesses hit by the Covid lockdown while also outlining a path to get the public finances onto a sounder footing.
The following is what we know so far about his package of measures:
The Chancellor is expected to announce plans to raise the rate of corporation tax from 19 per cent, although the timings and end target for such a move remain unclear.
There has been widespread speculation that the rate could rise to 23 per cent or even 25 per cent, which would still be likely to be the lowest rate in the G7.
Treasury sources have pointed to the fact that Joe Biden’s treasury secretary has indicated that she wants America’s corporation tax to rise from 21 to 28 per cent.
The increase could start later in the year or early next year if Mr Sunak pushes to delay changes with the economy still in freeze from the Covid lockdown.
Mr Sunak is not expected to increase income tax rates, given the Tory 2019 manifesto pledge not to raise the rates of income tax, VAT or national insurance.
However, as The Telegraph revealed, he is expected to freeze the £12,500 threshold, above which people start paying income tax, and the £50,000 threshold, above which people pay 40 per cent tax.
If the freeze kicks in from April the move would raise up to £6 billion by the next election, due in 2024, as millions more people pay a higher rate of tax on a chunk of their income.
The move is widely dubbed a “stealth” tax because the rates of tax are not strictly increasing but billions of pounds more are flowing into the Treasury.
Capital gains tax
A lot of focus has fallen on capital gains tax and whether Mr Sunak will increase it as he looks to fill the estimated £40 billion fiscal black hole caused by the pandemic.
One idea being speculated on is that the thresholds for capital gains tax could be raised to something closer to those used for income tax. It is not known where the Chancellor has landed on the issue and, with fierce warnings from some Tories over such rises, he may choose to delay any move on that front.
The Government will cover 80 per cent of wages for workers who have been put on leave due to the pandemic until the end of June, up to a maximum of £2,500 a month. The support tapers from then. The Government will contribute 70 per cent in July, then 60 per cent in August and September, with companies paying the difference to 80 per cent.
The extension of furlough is a major investment by the Treasury – it costs around £5 billion a month now – and reflects Mr Sunak’s declared focus on “jobs, jobs, jobs”.
Sizeable grants for the self-employed will continue, as The Telegraph revealed last month, with the fourth round of grants keeping the same terms as earlier versions.
That means the grant for February, March and April will see the Government cover 80 per cent of monthly profits up to a maximum of £2,500 a month. Also, people who became self-employed in the 2019-20 tax year will be allowed to get grants, closing a loophole in a boost to around 600,000 people.
A fifth grant is coming but the specifics are unclear and it is likely to be less generous than the fourth. Mr Sunak has also reportedly considered raising National Insurance contributions for the self-employed closer to the rate paid by businesses, but may pass on taking the move now.
Pensions are another area being closely watched. Mr Sunak reportedly has been considering freezing the lifetime allowance – the amount that people can save before incurring tax charges.
If he takes that step, also dubbed a “stealth” tax rise, people could face a 25 per cent levy on any additional income from their pension pot.
‘Help to Buy’ and stamp duty
The “Help To Buy” scheme is back, with the Government intervening to allow house-hunters to get on the property ladder with a deposit of just five per cent of the sale price.
The Treasury will guarantee a chunk of the loan offered by mortgage companies to make it easier for young couples to get approval for mortgages. The help is for properties worth up to £600,000.
Mr Sunak is also expected to extend the current freeze on stamp duty by around three months so that deals on the brink of completion do not collapse.
Fuel and beer duty
The Chancellor will announce that fuel duty will not be rising, meaning a 5p per litre increase which had been due will not be taking place.
It is the 10th year in a row the duty has been frozen and is a reflection in part of vocal campaigning from Tory backbenchers and The Sun newspaper. Mr Sunak has also been lobbied by Tory MPs to slash beer duty to help pubs.
The £20-a-month uplift in Universal Credit, a major benefits payment, will be extended by six months, helping poorer families through the financial impact of Covid.
The uplift was due to stop at the end of March, but Mr Sunak will announce on Wednesday that it will continue to around the end of September.
A fund of £5 billion will be announced to help pubs, restaurants, hairdressers and shops reopen after a deeply challenging past year with multiple lockdowns. They will be able to get up to £18,000 each. Some 700,000 businesses are expected to be eligible for the money once the fund goes live.
A major new tax aimed at online retailers who are fuelling the decline of the high street is being looked at, but decisions are unlikely until the autumn.
Cricket and pubs
The Chancellor will announce a £300 million package to help save summer sport, with cricket expected to be one of the big winners.
Theatres, museums, galleries and live music venues will get a further £400 million, while people can apply for up to £1 million to rescue local pubs and football clubs from closure.
It remains to be seen whether something similar to last summer’s “Eat Out to Help Out” scheme, designed to get money flowing into pubs and restaurants, will be announced.
Around £22 billion for a new infrastructure bank will be announced, made up of an initial £12 billion on capital investment and £10 billion in loan guarantees.
People will also be able to invest in the world’s first sovereign green savings bond. It will be offered by NS&A, which will invest in areas such as offshore wind and green energy crops.