NERVES OF STEEL... RISHI’S £ 30BN WAR ON VIRUS
As pandemic is declared, Chancellor delivers bold battle plan for Britain
RISHI Sunak unveiled an emergency £ 30billion blitz to defend Britain against the coronavirus yesterday, vowing: “We will get through this together.”
On the day the outbreak was declared a global pandemic, the Chancellor held his nerve and used his first Budget to hike spending on the NHS and boost growth to minimise the economic disruption from the health crisis.
He poured billions into guaranteeing sick pay and benefit payments to protect workers while slashing business rates and taxes to keep firms going.
But the package of measures is set to send Government borrowing soaring.
While warning the country to brace for a “significant” hit, he insisted the impact would be temporary and the economy will bounce back in the medium term.
Mr Sunak said: “For a period, it’s going to be tough, but I’m confident that our economic performance will recover.
“The British people may be worried, but they are not daunted.
“We will protect our country and our people.
We will rise to this challenge.”
Mr Sunak announced a £ 12billion package of immediate measures to prepare public services and businesses at the peak of the outbreak.
It included an extra £ 5billion for the NHS and other public services in an emergency response fund. There is also £ 7billion for helping firms and supporting employees in the face of an outbreak that could leave a fifth of the UK workforce too ill to work.
With 460 coronavirus cases and eight deaths in the UK confirmed, Boris Johnson is expected to today switch the Government’s response from attempting to contain the outbreak to a focus on delaying the spread.
The Prime Minister will take the decision to move to the second phase of his action plan, which could lead to major public gatherings being shut down and millions of people being advised to work from home.
As the Government prepares to ramp up preparations, Mr Sunak announced further measures costing £ 18billion this year, including road and rail projects, to boost the economy.
Around 30 million people are set to get a tax cut, with a raise in the National Insurance threshold. The instant tax cut will put an average of £ 100 a year in workers’ pockets from next month.
Officials insisted the package will help buoy the economy through the health crisis, even though the measures were planned before the full extent of the emergency was clear.
It came on top of a shock 0.5 per cent cut in interest rates announced by the Bank of England early yesterday, taking the base rate back to the historic low of 0.25 per cent.
Under Mr Sunak’s emergency measures, the Treasury will foot the bill for sick pay for up to two million small and medium- sized businesses to cover the cost of 14- day isolation periods for staff with coronavirus symptoms.
Half of the country’s firms will also be spared business rates for the next year while many small traders will be entitled to £ 3,000 grants to help them cope with the suspected drop in demand as consumers are forced to stay at home.
To protect the under- pressure hospitality trade, alcohol duty was frozen and pubs were given a £ 5,000 business rate discount. The Budget also poured £ 1billion into bolstering the benefits system and setting up a hardship fund to be administered by local authorities.
This will protect the most vulnerable from the financial impact of the outbreak.
Job seekers will no longer have to go to job centres to be entitled
to benefit payments. Mr Sunak insisted his Budget would lay the groundwork for long- term prosperity, as well as dealing with the short- term health crisis.
He said: “This Budget delivers security today but it also lays the foundations for prosperity tomorrow.” Mr Sunak also announced a massive splurge on infrastructure worth around £ 640billion over the course of the current parliamentary term, the biggest rise in Government investment since 1955.
He insisted his measures will deliver on the Tory general election manifesto, saying: “It is a Budget that delivers on our promises to the British people. It is a Budget of a Government that gets things done.”
MPs listened to Mr Sunak’s hour- long Budget speech in virtual silence.
Earlier, it had been revealed that health minister Nadine Dorries had become the first of their number to be infected with coronavirus. The Office for Budget Responsibility, the Government’s financial watchdog, warned that Treasury borrowing will be £ 125billion higher by the middle of the decade as a result of the Budget spending measures.
Treasury spending will soar by nearly £ 50billion a year by the middle of the decade as a result of yesterday’s Budget, it was said.
Labour leader Jeremy Corbyn claimed the Budget failed to reverse “the damage that has been done to our country” by austerity.
THE BACKDROP to this year’s Budget could hardly have been more daunting. With lethal speed, the coronavirus has wrecked the Government’s plans for a smooth post- election statement that would propel the economy towards the “broad sunlit uplands,” to use Winston Churchill’s resonant phrase. Instead, as the pandemic spreads across the world, the focus had to be on urgent measures that can prevent a slide into recession.
That danger is all too real. Today’s emergency has a disturbing echo of the 2008 financial crash, reflected in the decision by the independent Office for Budgetary Responsibility to slash its growth forecasts for this year. A vast range of businesses in Britain, from the travel industry to the hospitality trade, are now in deep trouble.
Share values have been tumbling on stock markets this week, supply chains are threatened, and the number of shoppers on the high street is plummeting. In another indicator of the crisis, on the very morning of yesterday’s Budget, the Bank of England announced a dramatic reduction in interest rates to just 0.25 per cent, alongside a move to free up £ 200billion in lending capacity.
The threat of an economic storm made the task of the Chancellor Rishi Sunak hard enough. But his difficulties were compounded by the fact that he has been in post for less than a month, following the resignation of his predecessor Sajid Javid during last month’s Cabinet reshuffle. Rarely in modern political history has such a massive burden fallen on such an inexperienced Treasury chief. At the age of just 39, he is the second youngest Chancellor of the past century after George Osborne. Indeed, he has been in Parliament for just five years and only reached the front rank of Government last July when was made Chief Secretary to the Treasury.
Yet the performance that he gave yesterday was a commanding one which banished any concerns about his maturity or grasp of policy. Assured, fluent and purposeful, his was a remarkable debut as Chancellor. As he outlined the Government’s plans to tackle the coronavirus crisis and boost prosperity, he showed no signs of nerves, just firm leadership. At times, while he confidently reeled off his announcements, he looked like a figure who had been in charge of the Treasury for a decade rather than a novice. Gone was the slightly robotic politician of last December’s General Election campaign. In came a minister who could mix eloquence with humour.
What was as compelling as his delivery was the scale of his ambition. He not only promised that the Government would rise to the challenge of the coronavirus by “acting in the national interest”, but he also set out a clear vision of a flourishing economy, where the expanded state would play a central role through enhanced public services and a revolutionised civic infrastructure. Austerity is now over, as he pledged the biggest sustained investment by the state in 50 years.
In a sense, it was lucky for the Government that Sajid Javid resigned in February, for Rishi Sunak is a far more impressive figure, with a much greater authority. In the words of the respected Tory MP Tom Tugendhat, Sunak “is his own man and a natural leader.” As a wealthy former City banker and hedge fund manager, educated at private school and Oxford, the new Chancellor might appear a very traditional Tory. But, he is also a very modern politician, embodying the changing nature of Britain in his modest background as the son of migrants.
‘ Assured, fluent and purposeful, a remarkable debut as Chancellor’
HIS FATHER was a GP, his mother a pharmacist, and he retains his Hindu faith, as highlighted when he took the oath as a new MP on the Bhagavad Gita, the sacred Sanskrit text. He is also teetotal, which meant that he refrained from drinking at the dispatch box yesterday, unlike many of his predecessors. Kenneth Clarke used to have a brandy, while Gladstone had a sherry mixed with a beaten egg.
When introducing his Budget in 1853, Gladstone spoke for more than four hours. Sunak addressed the House for only an hour, but he packed a huge amount of material into that speech. The centrepiece of his statement was his massive plan to deal with the consequences of the virus. “We will do right by you and your family,” he declared and the scale of the emergency package lived up to the pledge. Altogether, the fiscal stimulus he proposed amounted to a colossal £ 30billion, a sum that compares to the £ 12billion post- crash scheme implemented by the last Labour Government in 2008. “Whatever resources the NHS requires, it will get,” he said, as he revealed a £ 5billion emergency response fund.
To protect firms in the wake of falling demand, he is to introduce 100 per cent business rate relief for venues like theatres, restaurants and guest houses whose properties have a rateable value of less than £ 51,000. It is a bold move that will mean half of all businesses will pay no rates at all this year while, at a cost of £ 2billion, there is also to be a £ 3,000 special grant for 700,000 small firms. To help employees affected by the virus, the Government will bring in more generous rules on statutory sick pay and welfare benefits, as well as a £ 500million hardship fund for local authorities.
Mitigating the consequences of the virus
was the Chancellor’s top priority, but he also expressed his determination to boost prosperity over the longer- term. As promised in the Conservatives’ manifesto, living standards will be raised by an increase in the threshold for national insurance from £ 8,632 to £ 9,500 from April, which will effectively give 30 million workers a £ 100- a- year tax cut. Along with continuing freezes on alcohol duties and petrol taxes, there will also be a significant rise in the living wage to £ 10.50- an- hour, prompting Sunak to boast that the “Conservatives are the real workers’ party.”
He also wants to paint them as the party of the revived public sector, with more money for education and the NHS. George Osborne used to measure his success by how much he had cut the fiscal deficit. Rishi Sunak now trumpets that day- to- day Government spending will be £ 100billion higher by the end of this Parliament. Among all this largesse, an extra £ 6billion- a- year is to be poured into the health service by the end of this Parliament, enabling the recruitment of 50,000 more nurses and the construction of 40 new hospitals. There is also to be more support for social housing and tackling homelessness, partly funded by a stamp duty surcharge for foreign buyers.
LIKE THE Prime Minister, the Chancellor yesterday revealed himself to be an enthusiast of infrastructure spending. Indeed, after years of restraint, the taps on investment by the Government are to be opened wide, with extra capital expenditure going up by an annual £ 120billion- a- year to a total of £ 600billion over the next five years. As well as huge rail projects like HS2, there will be another £ 5.2billion for flood defences, £ 5billion for broadband, £ 27billion for improvements to the road network and £ 2.5billion of pothole repairs, a vital task since defective surfaces are estimated to account for 9,500 accidents a year. Science research, export loans and business start- ups are also to be bolstered by new capital investment.
Amidst this generosity, there was one glaring omission: the Chancellor made no mention of social care, despite the Prime Minister’s pre- election pledge of action to fix the broken system. Given the extent of neglect, it can only be hoped that this problem will be addressed in the autumn statement. There must also be concerns as to how the Government will pay for all his fiscal expansion over the long term. The Tories used to be the party of sound finance, but despite Sunak’s declaration that “we will always act responsibly”, the concept of prudence was given little priority. He did put forward some minor changes to increase tax revenues, like a reduction in Entrepreneurs’ relief and the phased withdrawal of diesel subsidies for certain commercial vehicles. But most of the new expenditure will have to be met by massive increases in borrowing by the state. That might be affordable now at a time of low interest rates, but in the long term, ballooning public debts can spell disaster, as the 2008 crash proved.
Yet the reality is that we are living in exceptional times due to the global pandemic. Unprecedented steps are required if our economy is not to buckle. Defying his inexperience, the Chancellor proved yesterday that he is a sure hand at the helm.
‘ As well as huge rail projects there will be billions for flood defences and roadworks’