Chancellor of the Exchequer Rishi Sunak delivered his first budget this afternoon. Just over a month into the job, the preparing this first budget after the UK left the EU was always going to be a tough gig for Sunak but the task of fiscal planning has been all the harder against the backdrop of the Corona outbreak and its impact on the UK and wider global economy .
It has meant that much of the work of the Treasury team has had to be abandoned in favour of measures which, it is hoped will have a more immediate impact on shoring up the economy. In particular Sunak sought to give the NHS got “whatever it needs” and to support businesses in managing the impact of the pandemic. The Chancellor acknowledged that the coronavirus will have a significant impact on the country and economy but that “we will get through it”. To mitigate that impact, he announced £30 billion of funding.
His efforts to safeguard the economy were given some early monetary support from the Bank of England which at 7am this morning announced a 0.50 percentage point cut in interest rates, taking its base rate down to 0.25 per cent alongside a package of moves to help banks support small and medium-sized businesses, where cashflow could be hit by a combination of slumping demand, trade difficulties and staff absence. The Bank said it expected UK economic activity to “weaken materially” over the coming months, but it was ready to take “all further necessary steps to support the UK economy”.
There was something of a ‘Gordon Brown’ feel to Sunak’s budget – lots of spending announcement with not a lot of detail on where the money is coming from. Details will no doubt emerge as the content of the “Red Book” (the small print) are analysed. For one so new in the job and facing so many challenges outside of his control, he delivered his speech with huge confidence. His refrain was he and the government were “getting it done” an indication that he and his Prime Minister already have an eye on the next election. Certainly it was a budget designed to support SMEs, especially the retail and hospitality sectors and stimulate spending, while the infrastructure investment is likely to be skewed away from London the South East as part of its “levelling up” agenda. Whether it is successful will depend largely on people’s ability and willingness to spend during the course of the spread of the disease.