March 11, 2020 @ 17:35 by Richard Dawson
Presenting his first Budget to the House of Commons, Rishi Sunak MP has today (March 11) announced what the Office for Budget Responsibility (OBR) is describing as the largest increase in public spending for 30 years.
The new Chancellor has promised £600 billion of infrastructure spending over the next five years, describing it as “the biggest increase in public net investment since 1955.”
Mr Sunak also announced a £30 billion emergency stimulus package to help mitigate the economic impact of the Coronavirus, which it is thought will cause significant disruption to UK productivity, supply chains, demand and output in the short-term.
For a party long thought of as the party of belt-tightening and fiscal consolidation, this Budget does represent a change of direction.
It was Phillip Hammond who first declared austerity was over, but if the Government follows through on the promises outlined below, it will be Rishi Sunak who has started to make this a reality.
Headline policy measures to tackle the Covid-19 outbreak included a £2 billion fund to support businesses if staff are off sick, £1 billion to ensure all workers get statutory sick pay, a scaling up of the HMRC’s Time to Pay scheme which allows businesses to defer tax payments and a loan scheme to support SMEs with cashflow issues.
The Chancellor also announced that business rates would be abolished in 2020 for retail, hospitality and leisure operators with a ratable value of less than £51,000.
In view of these short-term measures but not taking into account the economic impact of Covid-19, the OBR’s GDP growth forecast was set at 1.1 per cent for 2020 and then 1.8 per cent, 1.5 per cent, 1.3 per cent and 1.4 per cent for the following four years to the end of the Parliament.
For low paid workers, the Budget indicated an average rise of 6.2 per cent in the National Minimum Wage, as well as a plan to make the National Living Wage two thirds of UK median earnings by 2024.
To “unleash the power of business”, the Budget detailed £130 million for new start-up loans, £200 million for the British Business Bank, money for new growth hubs and business support centres in 21 UK cities and £5 billion in loans for exporters.
There was also a promise to increase investment in research and development by £22 billion per year as part of the Government’s commitment to “invest in ideas.”
On environmental issues, Mr Sunak revealed plans to increase taxes on pollution, plastic packaging and red diesel as well as spending £300 million to cut nitrogen dioxide emissions, £500 million to build more charging hubs for electric vehicles and a £640 million “nature for climate” fund.
There was also more detail on the £800 million plan to create carbon capture storage facilities, one of which is tipped to be in the Tees Valley and which would create 6500 jobs nationally.
Metropolitan mayors will benefit from a new £4.2 billion “London-style” funding settlement and a £1 billion “transforming cities fund” to improve local transport infrastructure.
On infrastructure generally, the Chancellor committed to the agreed phases of HS2, the Manchester-Leeds section of Northern Powerhouse Rail, the construction of a Midlands rail hub, the next phase of Darlington train station as well as £27 billion for new roads and £500 million for fixing potholes.
Public services will also receive a boost, with £7 billion going into UK schools – a 4.4 per cent increase per pupil and a massive £40 billion injection into the NHS to pay for, among other things, 50,000 new nurses and 40 new hospitals.
To pay for all of this, the Chancellor has proposed a number of measures on taxation, but it is thought that Government borrowing will increase significantly as a result. In an environment of historically low interest rates, that may not be a bad thing.
Mr Sunak concluded: “This budget delivers security today, but it also lays the foundations for prosperity tomorrow.”