SUNAK SPLASHES THE CASH AMID COVID-19 THREAT
■ But £30bn Budget bonanza will add £100bn to borrowing, warns watchdog ■ Plus: What it means for Wales
A£30BN package to stimulate the economy in the face of the coronavirus crisis was announced by Chancellor Rishi Sunak as growth forecasts were slashed and the Bank of England announced an emergency cut in interest rates.
In a Budget which was hastily rewritten in response to the Covid19 outbreak, Mr Sunak acknowledged the “challenging times” faced by the economy.
After less than a month in office, Mr Sunak delivered a Budget statement which acknowledged the British people were worried about the threat posed by the virus “but they are not daunted”.
Mr Sunak said there was “likely to be a temporary disruption” to the economy but insisted his plans would bring “stability and security”.
The scale of the challenge facing the economy was underlined by the Office for Budget Responsibility (OBR) in forecasts prepared before the full impact of the virus could be known.
The OBR said “a recession this year is quite possible if the spread of coronavirus causes widespread economic disruption”.
In response to the virus, Mr Sunak turned on the spending taps, with funding for public services, citizens and businesses which are set to suffer as the outbreak becomes more widespread and restrictions on activities are imposed.
Mr Sunak said: “Taken together, the extraordinary measures I have set out today represent £7bn to support the self-employed, businesses and vulnerable people. To support the NHS and other public services, I am also setting aside a £5bn emergency response fund – and will go further if necessary.”
Other plans represented another £18bn of “additional fiscal loosening” and “that means I am announcing today, in total, a £30bn fiscal stimulus to support British people, British jobs and British businesses through this moment”. Measures announced included:
■ A £1bn business rates holiday in the coming year for retail, leisure and hospitality firms in England with a rateable value of under £51,000;
■ the government will fully meet the cost of providing statutory sick pay for up to 14 days for workers in firms with up to 250 employees, providing over £2bn for up to two million businesses;
■ reforms to the benefits system to make it easier to access funds will provide a £500m boost to the welfare system, along with a £500m hardship fund;
■ a new coronavirus business interruption loan scheme offering government guarantees to support banks lending £1bn to small businesses;
■ £6bn of new funding for the NHS; £1.4bn in investment for the science institute at Weybridge, where samples of coronavirus are being analysed.
Hours before the Budget, the Bank of England set the scene with an emergency interest rate cut from
0.75% to 0.25%, and a series of other measures designed to help businesses and households through a coronavirus economic shock “that could prove sharp and large, but should be temporary”.
Mr Sunak said: “I know how worried people are. Worried about their health, the health of their loved ones, their jobs, their income, their businesses, their financial security.
“And I know they get even more worried when they turn on their TVs and hear talk of markets collapsing and recessions coming. People want to know what’s happening, and what can be done to fix it.
“What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure.”
He added: “We will get through this – together. 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.”
Despite speculation that he would ditch the framework on spending set by predecessor Sajid Javid, Mr Sunak said that his Budget is delivered “not just within the fiscal rules of the manifesto but with room to spare”.
He also announced that fuel duty would be frozen for another year in response to pressure from Tory MPs.
By the end of the Parliament in 2024 day-to-day spending on public services will be £100bn higher in cash terms than it is today, he said.
The entrepreneurs’ relief tax break will be scaled back, saving £6bn over the next five years.
But Mr Sunak said “most of that money” will go back to firms through a series of other measures: increasing the tax break for research and development expenditure, the structures and building allowance and increasing the employment allowance by a third to £4,000.
The Chancellor also confirmed plans to abolish the “red diesel” tax relief for most sectors, although farmers will continue to benefit.
Mr Sunak said from December 1 VAT on digital publications would be abolished, ending the “reading tax”.
The Chancellor promised £27bn in road improvements, “the biggestever investment in strategic roads and motorways”.
Investment in research and development would be increased to £22bn and £800m for a new “blue-skies funding agency” modelled on the Arpa programme in the US, a scheme championed by Boris Johnson’s aide Dominic Cummings.
Responding to the Budget statement, Labour leader Jeremy Corbyn welcomed the steps being taken to reduce the economic impact from coronavirus, but said the UK was going into the crisis with public services “on their knees” and an economy that was “flatlining”.
He said: “Today’s Budget was billed as a turning-point, a chance to deliver, in particular on the promises made to working-class communities during the General Election. But it doesn’t come close. The government’s boast of the biggest investment since the 1950s is frankly a sleight of hand.
“It’s in fact only the biggest since they began their slashand-burn assault on our services, economic infrastructure and living standards in 2010.
“Having ruthlessly forced down the living standards and life chances of millions of our people for a decade, the talk of levelling up is a cruel joke.
“The reality is that this is a Budget which has an admission of failure – an admission that austerity has been a failed experiment.
“It didn’t solve our economic problems, but made them worse, that held back our own recovery and failed even in its own terms.”
Mr Corbyn added: “Today’s measures go nowhere near reversing the damage that has been done to our country.”
With negotiations for a trade deal between the UK and EU ongoing, Seema Shah, chief strategist at Principal Global Investors, said: “The only missing – but very important – piece from the government is clarity on the Brexit timeline and removing the lingering fear of a no-deal exit.”
CHANCELLOR Rishi Sunak yesterday promised spending on potholes, better mobile phone coverage and record-breaking levels of investment targeted at every region and nation of the UK.
He also pledged an extra £360m for Wales and committed to a bypass in Pant-Llanymynech – something Boris Johnson had already promised if they won a majority in December’s General Election.
But what will any of the billions promised yesterday actually mean for Wales?
Wales receives grants from the UK Government, which funds most of its spending.
The Barnett formula determines how the largest of these grants – the block grants – change from one year to the next.
In the published Budget document, the UK Government promises to “work closely with the devolved administrations”.
It says changes across tax, welfare and public spending will apply across the whole of the UK including steps to upgrade digital infrastructure, support decarbonisation and reduce tax for employees and the self-employed.
For the areas where Budget measures don’t apply, there will be an additional £360m before adjustments for tax devolution, including a 5% uplift in Barnett consequentials, the UK Government says.
Here’s what the UK Government has promised for Wales:
■ Better mobile phone coverage
A £1bn deal with the mobile phone industry will see “poor and patchy mobile coverage become a thing of the past”.
They promise it will significantly improve 4G coverage across the nation, with the biggest improvements in Scotland, Northern Ireland and Wales, with the cost shared between government and the industry.
Maps, or details of the areas where signal will be improved, are not yet available.
■ Better broadband
The Budget promised next-generation broadband would be delivered to the most difficult-to-reach areas of the UK with a record £5bn of spending.
Gigabit-capable broadband, which is 40 times faster than standard superfast broadband, will be rolled out to the hardest-to-reach 20% of the country, with more than five million homes and businesses benefiting.
Already, £1bn was committed to digital broadband, and the Budget confirmed South Wales and Pembrokeshire have successfully bid for £12m and £4m respectively to fund full fibre broadband.
■ Improved access at railway stations
A £50m package of investment for accessibility improvements at railway stations was announced. Of the 12 stations to benefit, Newtown in Powys is one of them.
■ S4C to get £15m
Welsh-language broadcaster S4C will get around £15m worth of VAT refunds every year.
The UK Government will bring S4C’s VAT arrangements into line with UK-wide broadcasters BBC and ITN, as it will be able to recover the VAT it pays on its costs from April 2021.
Mr Sunak said: “S4C has become an integral part of the fabric of Welsh culture. We are determined to support the channel so it can continue to broadcast a variety of programmes for hundreds of thousands of Welshspeakers that watch it every week.”
■ A new Treasury office will open in Wales
Mr Sunak said: “A commitment from the Treasury to establish a presence in Wales to ensure Welsh priorities are central to economic decision-making.”
■ A new bypass
The government has pledged support to develop A483 Pant Llanymynech bypass. They say this is a measure to improve cross-border links.
It also pledges to support an independent economic review of the Western Gateway, which stretches across Wales and the West of England.
■ Justice and courts
The government will provide an additional £5m to begin a trial of integrated domestic abuse courts in England and Wales, £3m to launch a Royal Commission on the Criminal Justice process in England and Wales, another £68.5m to strengthen community sentences in England and Wales, including by increasing the number of offenders who are required to wear an electronic tag.
There will also be £15m to improve the justice system’s offer to victims. This will boost the support available to victims of rape, and create a new digital hub to make the criminal justice process in England and Wales easier to understand.
An additional £156m in 2020-21 will tackle prison maintenance issues, helping to maintain prison operating capacity and improve conditions for those living and working in prisons in England and Wales
■ City Deal funding
The government will provide funding for four City and Growth Deals in Scotland, Wales and Northern Ireland – £55m has been pledged for mid Wales.
■ EU structural funds
In repatriating the EU structural funds, the government has an historic opportunity to design a UK Shared Prosperity Fund to match domestic priorities.
The UK Shared Prosperity Fund will replace the overly bureaucratic EU structural funds, levelling up opportunity in each of the four nations of the country.
Funding will be realigned to match domestic priorities, not the EU’s, with a focus on investing in people. At a minimum, it will match current levels of funding for each nation from EU structural funds. The government will
set out further plans for the Fund, including at the CSR.
The Chancellor of the Exchequer, Rishi Sunak, said: “We made a promise to the people of Wales to build a fairer, more prosperous and more united country – and this Budget will deliver by laying the foundations for a decade of economic growth across the whole UK.
“We are giving the Welsh Government significant extra funding, exploring how to more successfully link the economies of Wales and the West of England, investing in transport and ensuring Wales has enough resources to support public services and businesses in the face of the Covid-19 outbreak.
“At the core of this Budget is an ambition to further strengthen the ties that bind us together as a United Kingdom and ensure everyone has the same opportunities in life, whichever part of the country they live in.”
Secretary of State for Wales Simon Hart said: “This Budget shows that the UK Government is keeping its promise to level up the nations and regions of the UK and deliver prosperity for Wales.
“From the financial support for city and growth deals, the focus on critical infrastructure projects, support for Welsh culture with the S4C tax relief, to significant additional spending power for the Welsh Government, this is a Budget with Wales’ economy at its centre.
“We are also supporting the Welsh Government in the exceptional challenges it currently faces, providing significant extra funding to help tackle coronavirus and for flood relief to affected communities.”
Plaid Cymru leader Adam Price said: “The Conservatives have presided over a lost decade of stuttering growth, woeful wages and costly cuts. But the slash-and-cut Tories still can’t bring themselves to do the right thing – funding for our devolved government is still going to be lower than it was ten years ago.
“With the coronavirus crisis, coupled with the ongoing uncertainty of EU-UK trade negotiations and the fallout of the devastating floods, the economy and our public services have been stripped of its resilience to cope with such issues.
“They have now been forced to put a sticking plaster over an ailing economy, that has been on life support for years.
“Although packaged as the great levelling up, this Budget is a great letdown for Wales. Baking in the unfairness, in capital terms, Wales is set to only get £1 for every £10 received by Scotland or for every £10 spent per head across the whole of the UK next year.
“This Budget is an explicit acceptance of the damage done by a decade of Tory economic ideology, but it doesn’t look like they plan on fixing it anytime soon for our nation.”
Labour’s Shadow Secretary of State for Wales, Christina Rees, said: “While the devil is in the detail, the disregard for our country was there for all to see. Not once did the Chancellor mention the floods that have caused such terrible misery for people in Wales – nor did he offer any support to help.
“We also heard nothing on transition arrangements for Wales as Brexit approaches. It’s simply not good enough. This wasn’t an end to austerity – it was a catalogue of rehashed announcements and a litany of missed opportunities. Wales deserves better.”