Rishi Sunak has hinted that he could make the UK government’s fiscal rules more flexible in next week’s Budget as he prepares to provide funds to fight the effects of the coronavirus.
The chancellor said he would offer help for public services, struggling businesses and vulnerable individuals as they faced the fallout of the disease.
“We will respond at scale to whatever scenario comes our way,” Mr Sunak told the BBC’s Andrew Marr show on Sunday.
He said the Budget would contain measures to help businesses — particularly small companies — cope with disruption that could be “significant but for a temporary period of time”.
They are expected to include a “time to pay” forbearance on tax bills and other measures to help companies facing cash flow problems. He called this plan “a bridge through temporary difficulty”.
He added that public services, including the NHS, would receive “the money required” to cope with a situation that could — according to the Sunday Times — result in around 100,000 deaths as “a central estimate”.
Mr Sunak is also looking to provide help for employees — particularly those on flexible contracts — and employers as staff are advised to stay away from work to avoid contaminating others with the virus.
But he repeatedly refused to confirm he would stick to the government’s pledge — contained in the Conservative election manifesto less than three months ago — to balance day-to-day spending by 2023.
Boris Johnson, the prime minister, was already keen to relax the fiscal rules before coronavirus struck — it was a major source of tension between Number 10 and former chancellor Sajid Javid — but now he has a plausible excuse for doing so.
Mr Sunak insisted he believed “very much in the importance of fiscal responsibility” but declined to say whether he would stick to the manifesto commitments in the face of highly constrained budgets on day-to-day current spending.
The chancellor’s allies do not expect him to rip up the fiscal rule on current spending — which commits to running a balanced budget at the end of three years — but they argue that he could make it more flexible without breaching the manifesto promise.
One option would be to target a balanced budget but to introduce a “plus or minus” band to provide more flexibility. Allowing a variation of 0.5 per cent around the target would provide Mr Sunak with more room for manoeuvre but allow him to say he was keeping public spending under control.
The chancellor also told the Sunday Telegraph newspaper in an interview he was examining “with interest” the idea of reclassifying some spending as “investment”; the government has allowed itself to borrow up to 3 per cent of GDP for investment.
Just three days ahead of his Budget, Mr Sunak was keen to stress that the government was “well prepared” to tackle the impact of coronavirus, adding: “We will get through it.”
The theme of the Budget — the first big fiscal statement of this government — will be delivering manifesto commitments, providing security for the economy and laying the foundations for future growth through a big infrastructure plan.
There will be a tax cut though a rise in the national insurance contribution threshold, while the Treasury will rewrite its cost/benefit rules to allow infrastructure projects to go ahead outside the London area which would otherwise have been deemed uneconomic.