Rishi Sunak launched a £30bn fiscal stimulus package to counter the shock of the coronavirus outbreak in his first UK Budget, measures that aim to prepare for economic turbulence while also delivering on the Conservatives’ pledge to address regional inequalities.
The UK chancellor acknowledged the coronavirus would cause “temporary disruption” to the economy but said the government would take action to mitigate the impact.
He announced that statutory sick pay will be available to all those advised to self-isolate from the virus. The government will refund the cost of statutory sick pay for up to 14 days to small and medium-sized businesses at a cost of £2bn.
He also pledged that the National Health Service will have however many “millions or billions” it required to tackle the illness. “Whatever it takes, whatever it costs, we stand behind our NHS,” he said.
A loan guarantee scheme will be launched for banks lending to small businesses on amounts of up to £1.2m. Business rates will also be scrapped for the next year for hospitality companies, venue owners, galleries and cinemas with a rateable value of up £51,000 to help cushion the blow from decreased demand. All duties on alcohol were frozen.
All smaller businesses that pay no business rates will receive a £3,000 cash grant, worth a total of £3bn.
The chancellor also announced a 90 per cent cut in entrepreneurs’ tax relief, which costs £3bn a year, which will be recycled into other corporate tax cuts.
Key coronavirus-related measures:
- Fiscal stimulus package worth £30bn
- Coronavirus will have “significant”, but “temporary” impact on UK economy
- NHS will get whatever funding it needs — be it “millions or billions”
- £5bn coronavirus emergency response fund for the NHS
- £500m hardship fund to directly support vulnerable people
- Business rates abolished for one year for small businesses in heavily-hit sectors, such as entertainment
The chancellor told the cabinet on Wednesday morning that the coronavirus was “front and centre in our minds” in writing the Budget and the measures he announced “will make the UK one of the best placed economies in the world to manage the potential impact of the virus”.
Mr Sunak’s statement marked the end of a decade of austerity, with significant increases in capital and day-to-day spending, financed primarily by extra borrowing.
Mr Sunak announced a review of the Treasury’s fiscal rules but did not break them. He stated this Budget would be “delivered within the fiscal rules of the manifesto but with room to spare.”
Borrowing forecasts have increased significantly. In 2020-21, the government will borrow 2.4 per cent of GDP, up from 1.8 per cent forecast in March 2019. In 2022-23, the UK will borrow 2.5 per cent of national income, up from 1.5 per cent.
Without the impact of coronavirus, the Office for Budget Responsibility has revised down its growth forecasts. In 2020, growth was projected at 1.1 per cent, down from 1.4 per cent in last year’s forecast.
In 2021, the OBR states growth would be 1.8 per cent, up from 1.6 per cent. In the medium term, growth would be 1.5 per cent in 2022, down from 1.6 per cent, and in 2023, 1.3 per cent down from 1.6 per cent.
The pound gave back earlier gains against the dollar during Mr Sunak’s Budget speech, trading at $1.2916 against the dollar, down from the day’s high of $1.2976 it hit following the Bank of England’s emergency rate cut earlier on Wednesday.
Mr Sunak announced that the freeze on fuel duty will be maintained — following an intensive lobbying campaign by Conservative MPs representing seats in the midlands and north of England. But tax relief on red diesel used in construction is to be abolished.