Chancellor Rishi Sunak has pledged a £30bn economic stimulus package to help tackle the effects of coronavirus in his first Budget.
The investment include measures to make it quicker and easier for people to access benefits, refunds for firms to cover sick pay, the scrapping of business rates for nearly half of all business properties in England and new schemes of loans and grants to support small to medium-sized firms.
The unprecedented £30bn package is nearly as large as the Scottish Government’s entire annual budget.
Sunak vowed to give the NHS whatever resources it needs to help tackle Covid-19 and said the UK Government’s economic response to the outbreak would bring “stability and security”
Hours before the Budget, the Bank of England announced an emergency interest rate cut from 0.75% to 0.25% designed to help businesses and households through a coronavirus economic shock “that could prove sharp and large, but should be temporary”.
The new Chancellor delivered his first set of tax and spending plans in the shadow of the news that UK health minister Nadine Dorries has tested positive for coronavirus.
He acknowledged that the outbreak is likely to see widespread disruption, with the potential for up to a fifth of the population to be off work at any one time.
Opening the Budget at Westminster, Sunak told MPs: “We will get through this together. The British people may be worried but they are not daunted.
“We will protect our country and our people. We will rise to this challenge.”
He added: “Taken together, the extraordinary measures I have set out today represent £7bn to support the self-employed, businesses and vulnerable people.
“To support the NHS and other public services, I am also setting aside a £5bn emergency response fund – and will go further if necessary.”
Other plans represented a further £18bn of “additional fiscal loosening” and “that means I am announcing today, in total, a £30bn fiscal stimulus to support British people, British jobs and British businesses through this moment”.
Sunak insisted his plans to substantially increase state spending – after a decade of austerity following the financial crash – remained within the government’s own fiscal rules.
However, the Office for Budget Responsibility (OBR) said this Budget would contribute to adding £125bn to the UK’s national debt by 2024/25.
As part of his spending package, the Chancellor promised reforms worth £500m for the welfare system and £500m for local authorities to launch “hardship funds” – a £1bn total investment in communities.
Health spending, council funding and business rates are all reserved to Holyrood, with the Scottish Government – which passed its own budget last week ahead of the UK’s in unusual circumstances – already facing pressure to replicate this support.
The Chancellor said the Budget meant an extra £640m would be available to the Scottish Government – which including £1.3bn planned for Scotland in the spending review would amount to a £2bn Barnett formula boost for Scottish Government coffers, Whitehall officials added.
There is also a plan to set up Treasury offices in Scotland, Wales and Northern Ireland.
Scottish Conservative MSP Murdo Fraser tweeted: “Huge assistance with business rates announced by Rishi Sunak… what will (finance secretary) Kate Forbes and (the Scottish Government) do for business here?”
However, policies in areas like employment rights (such as sick pay), the national minimum wage, and most taxes and duties (such as National Insurance, fuel duty and alcohol duties) are reserved to Westminster and therefore directly affect Scots.
Scottish finance secretary Kate Forbes said she was “pleased” to see the Chancellor respond to the potential economic impact of coronavirus.
But she added on Twitter: “We have no confirmation or clarity on what it means for Scotland.
“We need urgent confirmation of consequentials that will arise to ensure Scottish businesses are not at a disadvantage. Chancellor has said that NHS will get whatever is required – that must also apply to Scottish NHS.”
She said that most of the Barnett consequentials revealed by the Chancellor on Wednesday were already “baked into the Scottish Budget”.
Forbes added: “I recognise the economic impact on business from Covid-19 and I will ensure that businesses in Scotland are supported.
“To do that, we need urgent clarity on the actual funding available from the Chancellor after today’s budget which hasn’t, as yet, been confirmed.”
- Temporarily removing the “minimum income floor” for Universal Credit claimants, which calculates benefits based on expected earnings. Scrapping the floor means the self-employed and those in insecure work will not lose income if they have to stay at home.
- Suspending all job centre visits, and relaxing the requirement to physically attend a job centre to receive benefits.
- Making statutory sick pay available to anyone who needs to stay at home due to coronavirus from day one.
- Fully refunding the cost of providing statutory sick pay for up to 14 days for workers in firms with 250 employees or fewer.
- A £2bn loan scheme for small to medium-sized businesses to deal with coronavirus-related disruption.
- Scrapping business rates business rates for retail, hospitality, entertainment venues with rateable value of less than £51,000 – meaning “nearly half of all business properties in England will not spend a penny in business rates,” according to Sunak.
- For the smallest firms, less likely to need to pay business rates, they will be eligible for a £3000 cash grant to help combat the impact of the outbreak, benefiting around 700,000 firms in England.
- Increase in the National Insurance threshold from £8632 to £9500, which the Chancellor claims will be worth £100 a year to 31 million people throughout the UK.
- National Living Wage – the minimum wage for those 25 and over – will go up from £8.21 per hour to £8.72 per hour from April, with a target to raise it to £10.50 by 2024.
- Fuel duty frozen for another year, along with duty on beer and wine.
- The planned increase in spirits duty has also been frozen, benefiting the Scotch whisky industry, while £1m will be spending on promoting Scottish food and drink overseas
- Scrapping VAT on sanitary products from January 2021 – known as the “tampon tax”.
- Scrapping VAT on digital publications including books, newspapers, magazines and academic journals from December 1, ending the so-called “reading tax”.