As the number of cases affected by Covid-19 near 400 in the UK with MPs self-isolating themselves from the virus, chancellor Rishi Sunak launched a £30 billion economic stimulus plan aimed at combatting the virus epidemic.
Delivering his maiden budget speech, Sunak said that the economy had faced a “significant impact” from the spread of the virus, but assured that was likely to be temporary.
“Up to a fifth of the working age population could need to be off work at any one time. And business supply chains are being disrupted around the globe.
“I will do whatever it takes to support the economy,” he said as he announced that the NHS and other public services would receive an extra £5bn to help counter the spread of coronavirus.
Alongside these relief measures he also announced a package of measures to help companies facing a cash-flow crunch, including a year-long suspension of a property tax paid by smaller firms.
Companies and self-employed people would now be able to defer tax payments and sick pay qualification rules for workers and people on benefits are also relaxed as part of the budget.
Johnson had hoped the first tax-and-spending plan of his new government would showcase his plans to direct investment towards poorer regions, where voters helped him to a big election victory in December. However, the virus epidemic has deferred this spending spree.
A jump in public investment over the next five years, to what Sunak says are levels not seen since 1955, represents a turning point for the world’s fifth-biggest economy after a decade of austerity to narrow its budget deficit even as former prime minister Theresa May warned against it.
Ahead of Sunak’s speech the Bank of England cut its key interest rates by half a percentage point to 0.25 per cent, echoing last week’s emergency move by the US Federal Reserve. The BoE also introduced a new programme for cheap credit and reduced a special capital buffer to give banks more room to lend.
“This is a big package. It’s a big package. It is a big deal,” Governor Mark Carney said, adding that the BoE’s measures were equivalent to “north of one per cent” of economic output.
He said the Bank was coordinating with the government to have “maximum impact”.
Britain’s economy unexpectedly flat-lined in January even before the impact of the coronavirus kicked in, according to official data published on Wednesday.
Britain’s independent budget forecasters lowered their forecasts for economic growth this year and that estimate does not yet include an updated estimate for the impact of the virus. But Sunak said growth over the next two years would be 0.5 percentage points higher than it would have been without his stimulus plan.
