A raft of measures designed to protect the British economy against the impact of coronavirus have been announced in Chancellor Rishi Sunak’s first Budget – which also includes a vow to invest £600bn in Britain’s future prosperity.
Sunak unveiled a detailed package of measures designed to safeguard business during what is expected to be a ‘significant but temporary’ downturn, as well as a comprehensive longer-term investment strategy designed to boost science, innovation and sustainability.
That investment is pledged in infrastructure such as road, rail, telecoms and broadband, alongside a strategy to ensure this prosperity boosts the whole country rather than being concentrated in London.
Before this can happen, however, Britain must navigate the effects of Covid-19 – and Sunak says he believes today’s announcement amounts to ‘one of the most comprehensive economic responses of any government, anywhere in the world, to date’.
The Chancellor said: “Business supply chains are being interrupted around the globe. For a period, our productive capacity will shrink. There will also be a reduction on the demand side through a reduction in consumer spending.
“These things will have a significant impact on the economy. But it will be temporary. Life will return to normal. For a period, it’s going to be tough, but I’m confident our economy will recover.
“The right response is to provide a bridge for businesses, to ensure a temporary impact does not become permanent. We will get through this, together. We will protect our country and our people – we will rise to his challenge.”
Measures to maintain ‘stability and security in the economy’ by mitigating the impact of coronavirus outbreak include:
- Huge investment in the NHS. “Whatever it needs, whatever it costs, we stand behind our NHS,” said Sunak.
- Widening of sick pay eligibility and speed of entitlement, including support for those ordered to self-isolate, those in self-employment or the gig economy, plus creation of hardship funds for local authorities to administer.
- Refunding sick payments in full to SMEs of up to 250 people where staff are hit by the virus.
- Creation of a temporary coronavirus business loan scheme, with £1bn of government-secured cash available in loans of up to £1.2m to help affected companies.
- Abolishing business rates for 12 months for firms with a rateable value of less than £51,000 in leisure and hospitality sectors – shops, cinemas, bars, restaurants, guesthouses and more.
- Offering grants of £3,000 to 700,000 of the UK’s smallest businesses to manage fixed costs.
In total, this amounts to £7bn to ‘support self-employed, businesses and vulnerable’, plus a £5bn emergency response fund for the NHS.
Sunak acknowledged the virus impact will be felt in the ‘coming quarters’ but did outline a longer-term £175bn spending vision which he says the Office for Budget Responsibility predicts will boost productivity significantly over the coming parliamentary term.
That includes major investment in environmental initiatives, transport, digital technology, homes and education, with Sunak saying a ‘thriving private sector’ will be key to driving it all, as he pledged to ‘unleash the power of business’.
Sunak promised £130m to extend start-up loans, £200m for the British Business Bank to invest in scaleups, £200m for life sciences, extra money for growth hubs, £5bn of new export loans and the creation of dedicated trade envoys to represent UK regional interest overseas.
Business will benefit too from an increase in R&D expenditure credit from 12% to 13% – worth £2,400 on a typical R&D claim – and a structures and buildings allowance increase from 2% to 3%, giving £100,000 of relief for firms investing in a building worth £10m.
He also announced an increase in employment allowance by a third, amounting to a tax cut for nearly half a million small businesses.
And despite widespread expectation that the Budget would see the Entrepreneurs’ Relief scheme scrapped, it was instead retained in a scaled-down fashion, with lifetime eligibility reduced from £10m to £1m.
However, it was sustainability and innovation which dominated much of the government’s future spending agenda.
Sunak said: “Talent is evenly spread, but opportunity is not and we need to fix that. Roads, railway, broadband – this Budget gets that done.”
He pledged to ‘invest in ideas’ by doubling R&D investment to £22bn a year – the ‘fastest and biggest increase ever’ by a UK Government.
That includes £1.4bn in science institute at Weybridge, £900m in nuclear fusion, space and electric vehicles, £800m’plus in a blue skies funding agency modelled on ARPA in US, and £400m in high-quality research for universities around the country.
It will also see £1bn invested in green transport solutions, and a £500m rollout of rapid-charging points for electric vehicles.
Such investment is designed to create ‘high-scale, high-wage, low-carbon jobs for the future’ in ‘completely new industries’.
And this greener focus was demonstrated in the announcement of an increase in taxes on pollution, by freezing the levy on electricity and raising it on gas, introducing new financial penalties for manufacturers and importers using non-recycled plastics, and scrapping the red diesel tax breaks for most industries except for agriculture, fishing, rail and domestic heating.
Sunak also talked about a ‘change of government mindset’ to ensure ‘decision-making reflects the whole country’.
That will take the shape of city transformations for the likes of Stoke, Preston, Derby and Southampton, a £5bn investment in gigabyte broadband across the country, and pumping £510m into the rural phone network.
He pledged ‘£27bn of tarmac’ for motorways and strategic roads, backed by a pledge to fill 50 million potholes with a £2.5bn pothole fund.
Railway investment will not be limited to links with the capital, with a commitment to the Leeds to Manchester link on Northern Powerhouse Rail.
Regional focus also included a goal of moving 22,000 civil servants outside of London, creating an economic campus in the north housing 750 staff, and delivering hundreds of millions in funds to Wales, Scotland and Northern Ireland.
Sunak added: “Only by having a plan for prosperity will we grow the economy – only by growing the economy can we invest in our public services.
“This is the biggest programme of public investment ever; investment in every region and every nation.
“We promised to get Britain building – this Budget gets it done.”