The British government will attempt to mitigate the economic, social, and business impacts of the coronavirus outbreak with a combination of tax cuts and new spending, the chancellor announced Wednesday, the first of the new Boris Johnson government.
Chancellor Rishi Sunak has hailed what he called one of the most comprehensive responses by a government to coronavirus in the world as he unveiled a stimulus package worth £30 billion, including £12 billion of specifically targeted coronavirus relief.
Noting that one-fifth of the working population could be off work at any one time during the peak of the Coronavirus, the Chancellor said there would be a “significant impact” on the UK economy but said this would be temporary and that economic performance would “return to normal”.
Saying the government would strengthen the “safety net” to businesses to ensure temporary shocks caused by coronavirus wouldn’t become permanent — meaning business failure caused by staffing issues or a collapse in demand driven by people being forced to stay at home — Sunak announced a range of time-limited devices.
The chancellor appeared to write a blank cheque to the National Health Service (NHS), saying whether “millions or billions”, the state healthcare provider would get the funds it wanted. Sunak specifically cited funding research for a coronavirus vaccine, and the cost of hiring back retired NHS staff to cover a virus surge in demand as focusses for that money.
One of the largest areas of spending for the government on coronavirus appears to be social and business support, with Sunak effectively nationalising the cost of paying sick-pay to employees. For those working for businesses employing less than 250 people, the chancellor said the government would refund the cost, while for the self-employed there would be better access to benefits.
The government is also planning to make significant giveaways to small and medium businesses to help them through the worst of the coronavirus peak. In a remarkable £2 billion giveaway, the UK government is to give a £3,000 cash grant to small businesses with physical premises to help them through 2020. Meanwhile, medium businesses like restaurants, museums, and cinemas which are expected to be particularly hit by people not leaving the house due to illness will have their business rate taxes cut to zero for this year, a £1 billion taxcut.
While the giveaways will be well received by businesses, the surge in spending matched with tax cuts will likely be matched with a rise in borrowing. Indeed, giving pre-coronavirus Office for Budget Responsibility fiugures — in other words, probably an unlikely best-case scenario at this stage — Sunak revealed borrowing would rise from 2.1 per cent of GDP this year to 2.8 per cent in 2022.
This and massive infrastructure spending left the Financial Times predicting Tuesday that the government would engage in a “huge leap” in borrowing this budget.