New Chancellor to deliver budget amidst growing economic and public health crisis

The new Chancellor of the Exchequer, Rishi Sunak MP, will deliver his first Budget tomorrow (March 11) in the midst of a Coronavirus-induced economic and public health crisis.

Just a fortnight ago, it was understood that Sunak was going to announce the biggest increase in fiscal spending since the early 2000s, laying out the Government’s plans to ‘level up’ other parts of the country that have not had enough investment in recent years.

But given that the FTSE100 index has lost a staggering 20 per cent of its value in the last few weeks, it is likely that the new Chancellor will use his Budget to announce short-term economic relief measures rather than long-term infrastructure spending commitments.

The Covid-19 outbreak has savaged stock markets globally as fears mount about the possibility of a recession alongside the growing public health emergency.

As Mr Sunak looks to soothe the markets and prepare the NHS for a more serious outbreak of Covid-19, we can expect to see extra health spending, tax relief for companies with cashflow issues and plans to keep banks lending so that the UK economy does not grind to a halt.

David Gibbs, commercial director of UK Land Estates, would like to see new funding for commercial property development and has urged the chancellor to consider reintroducing “gap funding” grants for the industry.

He said: “Gap funding was highly successful in kick-starting regeneration in many towns and cities across England.

“The Government’s levelling up ambitions require fast, practical solutions to make them reality – and this could be part of the answer.

“The shortage of commercial property – particularly modern warehouse and manufacturing space – is stunting growth because businesses cannot expand or relocate to where skills and supply chains are located.

“This would be a sensible investment by the Government that would be paid back in measures such as regional expenditure and jobs.”

Alexandra Withers, North East chair of insolvency and restructuring trade body R3, called on the Government to scrap plans to push the taxman towards the front of the creditor queue in cases of corporate insolvency.

She said: “The Budget provides a chance for a rethink on a policy that will see the wider costs outweigh the benefits, and with a great deal of uncertainty on the horizon for everyone, we hope the new Chancellor will act on the continuing concerns of those at the sharp end of business rescue.

“The downsides of these plans are plain to see, with business investment, returns to creditors, and confidence in the UK’s corporate framework all standing to be damaged as a result of their introduction.

“More money back for HMRC after an insolvency means less money back for everyone else, which increases the risks of trading, lending and investing, and could harm access to finance, especially for SMEs.”

Tax changes will likely feature heavily in tomorrow’s Budget but, in light of the Coronavirus shock, it is difficult to know what to expect.

It is thought that reforms to things like entrepreneur’s relief, inheritance tax, mansion tax, pension tax relief and national insurance contributions are all under consideration.

The Bank of England could also cut interest rates to 0.5 per cent in line with the Budget tomorrow to support the economy.