UK’S financial heartthrob Rishi Sunak impresses with budget
UK’S new financial heartthrob, the Chancellor Rishi Sunak, delivered an impressive and ambitious budget on behalf of the Conservative government. Said to be the biggest spending spree since Norman Lamont’s pre-election budget of 1992 (John Major was elected). Sunak’s budget was full of confident detail that often eludes the Prime Minister, it is in many ways a Vote Leave Tory Budget. Sunak rose to the occasion of the corona-crisis, heis reassuringly throwing £30billion of fiscal stimulusmeasures to mitigate the economic disruption caused by Covid-19, including promising “millions or billions” to the NHS. Forecasting one fifth of the working population being likely to be off work and that disruption in global supply chains would cause productivity and consumer spending to shrink, Sunak said the effect would only be temporary and everything would return to normal. But how long is temporary is anyone’s guess, the corona cocktail of geopolitics/ a global downturn/ Brexit negotiations with the EU and Trump’s whims could make temporary a long one.
He admitted the coronavirus was a challenge but he was committed to keeping Britain healthy and financially secure, to help jobs and business the government will cover various levels of Statutory Sick Pay and Banks will offer loans of up to £1.2m to support small and medium sized businesses. Both the Bank of England and the UK government have indicated that they have further dry powder available, should conditions deteriorate further. Retail, leisure or hospitality businesses with a rateable value below £51,000 will pay no business rates whatsoever during the next financial year.
Sunak has calibrated his measures with the Bank of England and he surprised many by departing from the legacy of Margaret Thatcher with his spending and borrowing plans that have been likened to the approach taken by Labour’s Gordon Brown, the Office of Budget Responsibility said the budget risked taking UK into the realm of £2trillion of debt by the time of the next election in 2024.According to The Telegraph “Almost 500,000 extra workers will join the Government payroll under his (Sunak’s) plans with spending due to rise to more than £1 trillion pounds in 2022-23 for the first time ever.”
Sunak rose the threshold for National Insurance and increased the Living Wage by 2424, cut taxes on tampons and sanitary products, kept fuel duty frozen, Scottish food and drink for export got £1million support package, R&D spending was increased to £22billion and VAT is abolished on books newspapers and magazines. The environment will benefit from taxes on pollution and plastic packaging, green infrastructure and Innovative design carbon capture centres which will create about 6,000 jobs, addressing many concerns of the Midlands and North of England and the Red Wall that lent their vote to Johnson. The Governments of Scotland and Wales and the Northern Ireland Executive all receive some millions.
Infrastructure gets a £600billion boost for broadband, railways and roads, welcome news for those who drive on Britain’s potholed roads; and in the wake of Grenfell Tower £1billion is set aside to remove combustible cladding from tall social residential buildings . Sunak claimed the UK economy is well prepared for 10 years of Conservative Government and Conservative Chancellors, but he said “it’s important that we update our fiscal framework to remain at the leading edge of international best practice.” He will report back in the Autumn if changes to current fiscal rules are necessary.
In other news the Tory rebels who tabled an amendment to the Telecommunications Infrastructure (Leasehold Property) Bill lost by 306 votes to 282 votes, the amendment asked the government not to use vendors classed by the National Cyber Security Centre as high-risk vendors.
Trade talks with the EU broke down over differences, notably fisheries, governance and dispute settlement, and the so-called “level playing field”. The EU are working for the future of their Union, The UK’S team made clear that on 1 January 2021 the UK would regain its economic and political independence in full, and that the future relationship would need to reflect that reality. The next negotiating round will no longer on 18-20 March in London but Michael Gove said the UK expects to publish a draft FTA in the next few days.