Chancellor Rishi Sunak delivered his maiden budget on the floor of the parliament on Thursday 12th March. The house stands divided on Sunak’s “spending hike” especially as both former prime minister Theresa May and former Chancellor Sajid Javid raised alarm bells around the significance of maintaining fiscal discipline. Some economists have warned that the biggest capital spending splurge since 1955 comes at the price of a stagnated growth for the UK in the next two years especially amidst Corona virus pandemic and Brexit fears.
However, Sunak’s budget appears to be backed by the interest rate cuts announced by the Bank of England hours ahead of his speech in Parliament. But Sunak who has been co-ordinating with BoE to deliver a “maximum impact” budget said growth over the next two years would be 0.5 percentage points higher than it would have been without his stimulus plan to combat coronavirus.
The announcement of the £30 billion economic stimulus plan aimed at combatting the virus pandemic, remained at the heart of the budget especially as the PHE estimates that the domino effect of the virus can last until Spring 2021. While number of individuals to be infected with the virus remains conflicted, the PHE in the worst case scenario believes that about 8mn people in the UK can be affected Covid-19. If the forecast were to be a reality then £30 bn stimulus plan would just be a drop in the ocean especially as the NHS has already reported about shortage of Personal Protective Equipment (PPE) for doctors and nurses. Now, Sunak has promised further support would be provided if necessary and that the NHS would get the resources it needed to handle the crisis, starting with an immediate extra £5 billion. Governor Mark Carney in a statement said,
“This is a big package. It is a big deal,” adding that the BoE’s measures were equivalent to “north of one per cent” of economic output.
But the collapse of the stock markets, big-weight airline companies such as Flybe and uncertainty for other institutions such as Finablr have already pressed on the panic button. And amidst other indicators of the declining economy is the fall in the strength of the Sterling. On Tuesday, the pound slumped both against the dollar and the euro. Sterling recorded a collapse of 0.8 per cent against the euro to €1.0965, its lowest level since August last year, falling 0.4 per cent against the dollar to a five-month low of $1.2231. Pound’s collapse against the Euro is quite staggering considering Italy in the EU has quite literally become the war zone with over 1000 people reportedly dead and over 10,000 effected owing to Covid-19. However, over the coming days, if the PHE reports are to be believed then the number in the UK can rise incrementally. Perhaps, the markets are preparing themselves for the worst, only time will tell.
Delivering his stellar performance, on the floor of Parliament, Sunak said, “The British people may be worried, but they are not daunted. We will protect our country and our people.”
But Sunak’s budget looked beyond the virus and announced a series of measures including an abolition of the tampon tax. Tampons and other women’s sanitary products currently attract 5% VAT which will be dropped when the transition period for Britain departure from the EU ends on 31 December. The government estimates that the tax cut will lead to typical savings of 7p on a pack of 20 tampons and 5p on a pack of 12 pads, which could save the average woman an estimated £40 over her lifetime. Other also included £5 billion to upgrade broadband and 4G coverage, £27 billion on roads, £2.5 billion over five years to repair 50 million potholes and new money for housebuilding.
We provide a detailed breakdown of how the budget is going to impact the firt-time home owners, entrepreneurs and self-employed in what is currently a war-like era.
