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13 March 2020
Rishi Sunak’s first budget as Chancellor the Exchequer was dominated by policies to manage the impact of COVID–19 and protect the UK economy against recession. But he also announced ambitious spending commitments not seen in a government budget since Gordon Brown occupied 11 Downing Street.
This includes “historic” investment in transport infrastructure, the environment, pubs, welfare, housing and education, as well as a continued freeze on fuel duty, a policy some say is at odds with the government’s environmental commitments.
The actions to combat the impact of the coronavirus include a £30 billion fiscal stimulus package including £7 billion for businesses. These announcements have come as many businesses begin following advice on how to respond to the pandemic.
The Chancellor has also announced a raft of new policies to support business. These include £2bn of sick-pay rebates for up to 2m small businesses with fewer than 250 employees, £1bn of lending via a government-backed loan scheme, and a total abolition of business rates for retailers this year.
In addition, any company eligible for small business rates release will be able to claim a £3,000 cash grant, a policy affecting as many as 700,000 small businesses. Sunak will also seek to change entrepreneurs’ tax relief, reducing the lifetime limit from £10 million to £1 million—this was heavily criticised when introduced by Alistair Darling, so the decision to change entrepreneurs’ tax relief has been welcomed.
Sunak announced the creation of a new research and development agency modelled on ARPA—a US agency devoted to the development of emerging technologies—and an increase in R&D funding to its highest level for 40 years.
The budget includes significant spending on ‘levelling up’ the regions, with £5bn of investment in gigabit-capable broadband and significant increases in investment for Scotland, Wales, Northern Ireland and Yorkshire in particular. There will also be funding to help rough sleepers into accommodation, and £1.1 billion will be allocated to building 70,000 new homes.
But it’s not all good news. Growth forecasts have been slashed, with the Treasury now predicting 1.1% growth in 2020, and 1.8%, 1.5%, 1.3% and 1.4% over the subsequent years—this forecast has not taken into account the impact of COVID–19. Borrowing, meanwhile, will rise as a percentage of GDP to 2.8% in 2021–22, but Sunak insists the budget falls with fiscal rules.
Rishi Sunak has offered a mixed picture, but his spending commitments have been widely praised as a significant reversal of austerity. The outcome remains to be seen!