DR FEELGOOD TO THE RESCUE
New Tory star’s £30bn tonic to fight virus fallout Cash for sick workers ++ Shops’ taxes slashed Biggest Budget splurge in 30 years to boost Britain
RISHI Sunak gave the economy a £ 30billion vaccination against the coronavirus yesterday. In an assured Budget debut as Chancellor, he pledged to do ‘whatever By Jason Groves Political Editor it takes’ to help businesses, workers and the NHS. He also promised an extra £175billion to transform UK infrastructure.
To fight what is now officially a global pandemic, hospitals are being handed £5billion while thousands of firms will be given a business rates holiday to help avert the risk of bankruptcy.
Sick pay will be reformed to ensure that employees are not penalised for going into quarantine.
The Chancellor declared: ‘We are doing everything we can to keep this country, and our people, healthy and financially secure.’
His package came as the Bank of England’s base rate was slashed to a historic low of just 0.25 per cent.
Boris Johnson is expected to confirm today that the UK is switching from
a strategy of trying to contain the outbreak to one of trying to delay its worst effects in order to give the NHS more time to cope. The Prime Minister – one of whose Cabinet ministers went into self-isolation last night – is also likely to announce a range of social-distancing measures.
Mr Sunak admitted yesterday that the epidemic was now likely to cause ‘temporary disruption to the economy’, with millions of workers having to take time off sick, firms struggling with supply problems and shops and restaurants hit by a dramatic fall in trade.
‘The combination of those effects will have a significant impact on the UK economy,’ he said. ‘But it will be temporary. People will return to work.
‘Supply chains will return to normal. Life will return to normal. For a period, it’s going to be tough. But I’m confident that our economic performance will recover.’
The emergency package, which was finalised in the early hours of yesterday, overshadowed a series of massive spending decisions that set the Government’s economic course for the next four years.
Mr Sunak pledged to increase total spending by 22 per cent by 2024, taking the size of the state to more than £1trillion for the first time. Much of the spending will be fuelled by borrowing, with the national debt now on track to top £2trillion by the time of the next election.
It will fund a huge infrastructure spending programme, with more money for roads, rail, broadband, science, housing and even potholes. Treasury rules that have favoured London and the South East will be torn up to ensure investment is spread out across the country.
The Office for Budget Responsibility said it was the ‘largest sustained fiscal loosening’ since Norman Lamont’s pre-election giveaway of 1992.
The OBR said the ‘ striking turnaround’ meant that the austerity cuts of the last decade would be ‘entirely reversed’ by the next election.
While some Conservative MPs voiced disquiet at the scale of the spending, one senior Tory said the Budget encapsulated Mr Johnson’s philosophy of ‘boosterism’.
‘People have asked what boosterism means,’ the source said. ‘This is what it means – investing in the economy, in all parts of the country, in order to level up opportunity and take this country forward.’
One of the most significant Budgets for years confirmed a rise in the threshold for paying national insurance that delivers an immediate £100 tax cut for 31million workers.
There were also freezes on fuel and alcohol duties, £27billion for road- building and £5.2billion for flood defences.
The OBR yesterday warned that the coronavirus could lead to a prolonged slowdown, adding: ‘Recession this year is quite possible if the spread of coronavirus causes widespread economic disruption.’ Mr Sunak said he was ready to make further interventions to ensure that good businesses were not driven to the wall.
He said yesterday’s £30billion package comprised £12billion of direct spending and £18billion of broader stimulus to the economy.
‘While the world may slow down, we will act here with a response that is brave and bold, taking decisions now for our future prosperity,’ the Chancellor added. ‘ We are investing in world class infrastructure, and to lead the world in the industries and technologies of the future.’
Mr Sunak said the ‘central decision’ was to increase spending over existing plans by £175billion.
The overall tax burden will not rise, mainly because of a decision to abandon a cut in corporation tax. The Treasury admitted the spending might not meet earlier fiscal rules.
Some senior Tories voiced reservations. Theresa May said the Conservatives must never fall into Labour’s trap of believing that all problems could be fixed by unconstrained spending.
The former prime minister added: ‘While spending a lot of money may be popular and may seem the natural thing to do, there is of course that necessity of having a realistic assessment of the longer-term impact.
‘[There is] a necessity to ensure that we have that restraint and caution that enables us to make sure the public finances continue to be strong into the future.’
AT the Commons despatch box yesterday, a new star entered the Tory firmament.
Belying the fact that he was propelled into the job of Chancellor just a month ago, Rishi Sunak delivered his crisis Budget with all the panache, wit and passion of a seasoned performer.
If the new boy had nerves, they certainly didn’t show. It was a bravura performance to match the seriousness of the moment.
For while there was plenty in it to show Mr Sunak’s determination to ‘boosterise’ Britain, this will be remembered as the Coronavirus Budget.
Anyone who feared the Government was underestimating the virus threat was quickly disabused. With a dynamic £30billion package of emergency measures, Mr Sunak showed he had no reservations about throwing money at the problem.
Business rates scrapped for small firms and high street shops, cafes, museums and cinemas.
A plethora of cheap loans and extended credit. A blank cheque for the NHS. Sick pay refunds, benefits delivered more quickly, cash grants, National Insurance cuts for all, a £500million hardship fund to help the vulnerable.
And on top of all that, the Bank of England cut its interest rate to a minuscule 0.25 per cent, signalling cheaper borrowing costs for both businesses and families.
Short of coming up with a vaccine, it’s hard to see what more Mr Sunak could have done. He was Dr Feelgood in action.
But this was a Budget of two very distinct halves. After presenting a short-term cure for the virus, he laid out his prescription for Britain’s long-term prosperity.
And what a spending spree it is – the biggest since 1992. More than £600billion on infrastructure over five years, fuel and alcohol duty frozen, £2.5billion for potholes.
Money for further education and for homelessness, rates reductions for pubs, funding for hi- tech research and development, broadband and for removing Grenfell-style cladding from tower blocks.
There was a nod to the ‘Red Wall’, with extra funding for Northern cities, thousands of civil servants moving out of London and extra billions for regional transport.
The green lobby, too, was thrown a bone. Mr Sunak announced huge tree-planting and peat bog restoration programmes, a welcome levy on unrecyclable plastic and tax hikes on some polluting fuels.
Above all, this was a Budget which emphatically signalled the end of austerity. However, it comes at a price.
The Office for Budget Responsibility, while generally positive, points out that most of this public spending splurge will have to be funded by borrowing.
It’s true that interest rates are at a historic low, so borrowing has never been easier or cheaper. Yet that doesn’t alter the fact that by 2025 our national debt is expected to top £2trillion for the first time.
This paper has always believed we must pay our own way in the world. Slashing the deficit and getting a grip on the overall debt mountain has arguably been the greatest economic achievement of the last decade. It must not be casually thrown away. But Boris Johnson promised an investment and infrastructure revolution to unleash Britain’s potential, ‘level up’ the regions and launch our country into the post-Brexit world.
This Budget, presented with brio by his young disciple, is his vision for a freer, more prosperous One Nation future.
So yes, he will have to ensure that spending doesn’t spiral out of control, especially on HS2. Waste must be ruthlessly rooted out and borrowing kept within reasonable levels.
But just four months ago, the British people gave Boris a powerful mandate for radical change. This is the blueprint for that change. He is keeping his word.