Sunak’s opening remarks
Rishi Sunak opens the budget on the coronavirus outbreak: “I know how worried people are … what everyone needs to know is we are doing everything we can to keep this country and our people healthy and financially secure. This is an issue above party.”
The chancellor says “we will get through this together”. But there are other matters also to address, after the election victory. He adds: “We just had a general election where people voted for change … this budget delivers on that change. Yes, it is a budget that provides for security today, but it is also a plan for tomorrow.”
Rowena Mason, political correspondent: Sunak focuses initially on the public health challenges of coronavirus but also wants people to remember that the government has other priorities, such as “levelling up” across the country. He will have a tough job getting anyone to focus on anything but the immediate crisis, though.
Coronavirus
Sunak announces a fiscal stimulus totalling £30bn, including welfare and business support, sick-pay changes and local assistance.
He says this includes £7bn for businesses and families and £5bn for the NHS.
The chancellor says he believes this is larger than any other country at present.
RM: That is a big emergency package to be announcing in a budget, signalling the government is taking the threat of the coronavirus to the economy extremely seriously. The action is commensurate with a Treasury preparing for the possibility of a recession.
Welfare
Sunak announces £1bn of additional funding, including a £500m local authority hardship fund.
Statutory sick pay will be available to individuals self-isolating. Sick notes will be available by contacting NHS 111.
Sunak says millions working self-employed or in the gig economy will also need help. The government will make it quicker and easier to access benefits.
Contributory employment and support allowance (ESA) will be claimable from day one, rather than day eight. The minimum income floor for universal credit will be removed. The requirement to physically attend a job centre will be removed – everything can be done on the phone and online.
RM: This has been a massive demand from MPs across the Commons to ensure people who have to spend time off sick are still paid – otherwise they may be tempted to go to work. This will provide some reassurance that help can be accessed more easily and quickly.
Business support
Sunak announces £2bn of sick-pay rebates for up to 2m small businesses with fewer than 250 employees.
The chancellor announces £1bn of lending via a government-backed loan scheme, with government backing 80% of losses on bank lending.
He will also abolish business rates altogether for this year for retailers, in a tax cut worth more than £1bn.
Any company eligible for small business rates relief will be allowed a £3,000 cash grant – a £2bn injection for 700,000 small businesses.
RM: Businesses have been extremely anxious about the possible impact of cashflow difficulties if trading slows or staff are off sick because of coronavirus. The package looks quite comprehensive and generous for the smallest struggling businesses, but the small print will be important.
Growth
The chancellor forecasts growth before the coronavirus hit of 1.1% in 2020, then 1.8%, 1.5%, then 1.3% and 1.4% in the following years.
In March 2019 – the most recent official growth forecasts from the Office for Budget Responsibility (OBR) – the UK economy was expected to grow at 1.4% for 2020, 1.6% in 2021, 1.6% in 2022 and 1.6% in 2023.
RM: Growth has been downgraded, even without the impact of the coronavirus being taken into account, which is pretty negative news. Sunak does not appear to be revealing the figures for the predicted impact of the virus. That lack of transparency surely cannot hold for long.
Borrowing
Sunak says borrowing as a percentage of GDP will be 2.1% this year then will rise to 2.4% in 2020-2021, 2.8% in 2021-22, then falls to 2.5%, 2.4% and 2.2% in the following years. He does not give a figure in cash terms.
He says debt as a share of GDP is forecast to fall from 79.5% this year to 75.2% in 2024-25.
He says the budget is within the fiscal rules – but he will review them decide if they should change this autumn.
He says by 2022-23 there will be “fiscal space” – spending headroom – of £12bn.
In December 2019 – the most recent borrowing forecasts from the OBR – the UK’s budget deficit (the shortfall between government spending and tax income) was forecast to rise from £41.0bn in 2018-19 to as much as £47.6bn in 2019-20, before falling slightly to £40.2bn in 2020-21, then £37.6bn in 2021-22, £35.4bn in 2022-23 and £33.3bn in 2023-24.
Sunak’s predecessor, Sajid Javid, had set fiscal rules that forced the government to balance day-to-day spending with tax income (excluding investment spending) by 2023.
RM: Sunak is paving the way to ditch the fiscal rules of his predecessor, announcing a review of the framework that is likely to conclude he should be allowed to borrow and spend more. That should be chalked up as a victory for those in No 10, such as Dominic Cummings, who wanted looser constraints to allow for spending on new Tory seats across the north.
Pubs
A planned rise in beer duty will be cancelled, while duties for cider and wine will also be frozen.
Exceptionally for this year, Sunak says business rate discount for pubs will be £5,000, up from £1,000.
RM: This is another policy that will be popular with backbench Tories who will enjoy boasting about it to constituents. It also shows Sunak is not tapping a traditional source of extra tax revenue that chancellors often turn to when they need extra cash.
Fuel duty
The chancellor says fuel duty will remain frozen for another year. That will mean a saving of £1,200 since 2010, but at a cost of more than £100bn to the exchequer.
RM: Tory MPs had campaigned furiously against a mooted rise in fuel duty, saying it would betray the party’s new voters who rely on cars. They appear to have shown their strength in ensuring that, once again, it remains the same.
Entrepreneurs’ relief
Sunak says he will change entrepreneurs’ tax relief, rather than abolish it, saying he is sympathetic to the argument that it is the UK’s “worst tax break”.
He will reduce the lifetime limit for relief from £10m to £1m. About 80% of small businesses are not affected. The reforms save £6bn over the next five years.
He will spend these funds on business tax relief for investing in buildings, employment and research and development.
RM: This is Sunak’s first tax-raising measure in the budget, with the rest giveaways so far. Entrepreneurs’ relief has been heavily criticised by thinktanks for costing far more than it did when it was introduced by Alistair Darling and extended by George Osborne. Targeted at bigger businesses, it is unlikely to cause too much rebellion or criticism from Tory backbenchers.
Environment
Sunak says he will increase taxes on pollution, and raise funding for green transport solutions by £1bn.
The chancellor says he will abolish tax relief for red diesel for most sectors, which he says is a £2.4bn tax break for pollution. The change will take place in two years. Agriculture, rail, fishing and domestic heating will be exempt.
From April 2022, the government will charge £200 per tonne on packaging with less than 30% recycled content.
30,000 hectares of trees will be planted, Sunak says – a forest larger than Birmingham – and 35,000 hectares of peatland restored.
As trailed before the budget, the chancellor says he will double investment in flood defences over the next five years to £5.2bn.
RM: Sunak ducked the decision on raising fuel duty and is going after the “red diesel” tax relief for off-road fuel instead, as the government tries to show some green credentials in the year of COP26. Industry will not be too happy but the two-year delay could allay some concerns.
‘Levelling up’
Sunak says the government is tripling its investment in transport and infrastructure spending to the highest levels since 1955.
The chancellor says “if the country needs it, we will build it”.
The government will provide additional funding worth £640m for Scotland, £360m for Wales and £210m for Northern Ireland.
He says West Yorkshire will have a directly elected mayor who will share an extra £4.2bn with other metro mayors for transport investment.
The government will spend £27bn on more than 4,000 miles of roads.
£5bn of funding will be invested in gigabit-capable broadband.
An additional £1.5bn will be made available for further education funding.
More than 750 staff from Treasury, business and trade departments will move to an economic campus in the north of England. Long-term more than 22,000 civil servant roles will move outside central London.
RM: Sunak claims this is the biggest level of infrastructure spend – on transport and broadband – in half a century. This is part of the Tories’ manifesto pledge to improve life for those outside London and other cities, which Boris Johnson calls “levelling up”. The challenge for the government will be to get any of these infrastructure projects actually done by the time of the next election if the party wants to keep its new voters.
Housing
Sunak says almost £1.1bn of allocations from the housing infrastructure fund will be made to build almost 70,000 homes in high-demand areas.
The chancellor announces a Grenfell building safety fund worth £1bn. The funds will help to remove cladding from tall residential buildings.
He says almost £650m of funding will be made available to help rough sleepers into accommodation.
RM: The new £1bn Grenfell fund is a large pot – and an unexpected one – that will go down well with those affected by dangerous cladding. However, many people will say the government should have stepped in sooner.
NHS
Sunak says the government will increase NHS funding by £6bn during this parliament. Reiterating campaign pledges, he says the package will help to hire 50,000 nurses and build 40 hospitals.
The chancellor announces the NHS surcharge for people from overseas will increase to £624.
RM: These are the party’s manifesto pledges on the NHS. There does not seem to be any specific extra price tag on dealing with coronavirus but the chancellor has previously promised to give the health service whatever it needs.
