The Chancellor, Rishi Sunak, delivered what must have been the most important speech of his life today with the nation, and much of Europe, now reaching crisis point.
Having unexpectedly stumbled into the job less than a month ago, he was always going to have his work cut out to deliver this. And that was before the Covid-19 spectre reared up.
Now he may be thankful to have two budgets in 2020, after we had none at all in 2019. This has allowed him this time to prepare for contagion and give a flavour of what might be to come in November, when we may be in calmer waters.
As expected, the coronavirus dominated much of the Budget. Despite that it was packed full of announcements and plenty of spending.
He gave very little detail on where that money will come from.
First, a comprehensive response to the coronavirus contagion
The Chancellor announced a £30bn fiscal stimulus to support “British people, British jobs and British businesses” through the coronavirus crisis.
In what seems like a deliberate effort to mitigate accusations that the Government has not done enough to tackle the crisis, the Chancellor has tacked to the other side of his critics. He reiterated that this was the most comprehensive response to the contagion anywhere in the world.
The £30bn includes some £7bn to support the self-employed, businesses and vulnerable people:
- the Government will fund sick pay for two weeks for businesses with fewer than 250 employees
- a £3,000 cash grant per business for any firm that is currently eligible for the small business rates relief. This is a £2bn cash injection direct to 700,000 of the UK’s smallest firms
- a coronavirus loan of up to £1.2m for SMEs to cover the cost of salaries and bills
- the Chancellor abolished business rates for firms in the retail, leisure and hospitality sectors
The NHS will get whatever it needs to cope with the crisis. This includes a £5bn emergency response fund.
On top of these two funds, the Chancellor announced additional fiscal loosening of £18bn to support the economy this year and mitigate the short- and long-term impact of the coronavirus.
Getting back to getting it all done
Beyond the contagion, the Chancellor didn’t miss the opportunity to remind the House of Commons that the Conservatives are the party that is getting things done.
He announced a whopping extra infrastructure spending of £175bn over the course of this Parliament compared to what was planned before the election.
More than £600bn will be spent on roads, rail, broadband and housing by the middle of 2025. Ministers say this represents the largest capital investment in infrastructure for generations.
The Chancellor also promised another £200m for the British Business Bank alongside £130m of new funding for extend start-up loans and £5bn of new export loans.
He also retained Entrepreneurs Relief but reduced the lifetime allowance from £10m to £1m.
The government will massively increase research and development investment to £22bn. This is now the highest it’s been in 40 years and far more than a lot of other developed nations.
The government will spend £5bn on getting gigabit-capable broadband into the hardest-to-reach places. The Chancellor also pledged an extra £900m for research into nuclear fusion, space and electric vehicles.
R&D tax credit will be increased from 12% to 15%, although we need to wait and see if the definition will be changed so this credit can be applied to investing in digital technology, such as cloud computing.
Increasing productivity and creating prosperity
Overall, the Chancellor said the Office for Budget Responsibility expects growth to be 0.5% higher over the next two years as a result of the packages he has announced.
The GDP forecast, without fully accounting for the impact of coronavirus, would have led to growth of 1.1% in 2020 and 1.8% in 2021, then 1.5%, 1.3%, and 1.4% in the following years.
But, whether these forecasts are accurate, will depend how the UK public and the economy responds to coronavirus in the coming weeks and months.