Budget 2020: Rishi Sunak launches £30bn coronavirus fightback

Camley's Cartoon: £30bn for Coronavirus.

The extra money will come from a mixture of extra borrowing and Government reserves.

However, Mr Sunak made clear he would stump up more money if needed; effectively offering a blank cheque to help the NHS cope with extra demand.

• READ MORE: Key figures comment on Rishi Sunak's spending plans

To Tory cheers, he declared: “Whatever extra resources our NHS needs to cope with Covid-19, it will get.

“So, whether its research for a vaccine, recruiting thousands of returning staff, or supporting our brilliant doctors and nurses, whether its millions of pounds or billions of pounds, whatever it needs, whatever it costs, we stand behind our NHS.”

The first Budget of the Johnson Government, hastily rewritten because of the coronavirus outbreak, came just hours after the Bank of England announced an emergency cut in interest rates to the historic low of 0.25 per cent in a co-ordinated action to combat the outbreak.

In a polished performance at the Commons dispatch box, Mr Sunak - who only became Chancellor a month ago - acknowledged the country faced a tough and challenging time ahead as the outbreak spread; the number of cases in the past 24 hours have increased by 85 to 458.

However, he told MPs: “Let me say this: 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.”

With the Government having prepared the country for potentially a sharp rise in Covid-19 cases in the next two to three weeks, Mr Sunak made clear there was likely to be a period of economic disruption ahead.

This, he pointed out, might mean “up to a fifth of the working-age population could need to be off work at any one time”; this would be up to 6.5 million people across the UK; some 500,000 in Scotland.

The Chancellor explained: “This combination of people being unable to work and businesses being unable to access goods will mean that for a period our productive capacity will shrink. There will also be an impact on the demand side of the economy through a reduction in consumer spending."

But, he stressed, the effect would be temporary. "People will return to work. Supply chains will return to normal. Life will return to normal. For a period, it’s going to be tough but I’m confident that our economic performance will recover,” he declared.

Of the £30bn in extra spending, £12bn will be specifically targeted at coronavirus measures, including at least £5bn for the NHS in England with the other £18bn of wider spending aimed at stimulating the economy.

This extra health spending will lead to a knock-on windfall of around £500m for the Scottish Government.

Measures to combat Covid-19 include:

*a £1bn business rates holiday in the coming year for retail, leisure and hospitality firms with a rateable value of under £51,000;

*the Government fully meeting the cost of providing statutory sick pay for up to 14 days for workers in firms with up to 250 employees, providing over £2bn for up to two million businesses;

*statutory sick pay being made available to all those advised to self-isolate, even if they have no symptoms, and sick notes available from NHS 111 rather than a GP;

*reforms to the benefits system to make it easier to access funds, providing a £500m boost to the welfare system along with a £500m hardship fund and

*a new coronavirus business interruption loan scheme offering Government guarantees to support banks lending £1bn to small businesses.

The second part of the fiscal statement unveiled, as expected, the new Chancellor’s spending spree.

He announced £640bn for road, rail, housing and broadband projects over five years, aimed at delivering on the Conservatives' election promise to boost economic growth outside of London and the south-east of England and “level up” the country.

Despite speculation that he would ditch the framework on spending set by predecessor Sajid Javid, Mr Sunak said that his Budget was delivered "not just within the fiscal rules of the manifesto but with room to spare".

And he stressed while the world economy was slowing down, the Government would be “brave and bold, taking decisions now for our future prosperity”.

Day-to-day spending is set to grow at an average of 2.8 per cent as the Tories move away from austerity and attempt to shore up support among the former Labour voters who delivered Boris Johnson's election victory in December.

By the end of the Parliament in 2024 day-to-day spending on public services would be £100bn higher in cash terms than it is today, the Chancellor emphasised.

The Office for Budget Responsibility, the Government’s independent forecaster, said the Chancellor’s statement marked the largest "Budget giveaway" since 1992 and would add around £100bn to public borrowing by 2024.

But it warned: "A recession this year is quite possible if the spread of coronavirus causes widespread economic disruption".

Growth is expected to fall to 1.1 per cent in 2020, down from 1.2 per cent last year and dramatically lower than the OBR's previous estimate of 1.4 per cent; even without the full impact of coronavirus being reflected in the forecast.

The OBR estimated the Chancellor's total Budget spending plans would boost growth over the next two years by 0.5 percentage points. But it would take its toll on the country's borrowing level.

The OBR forecast borrowing would jump from £47.4bn this financial year to £54.8bn in 2020-21 before surging to £66.7bn in 2021-22.

Together, the forecasts mean borrowing will total £290.6bn through to the end of 2023-24 - almost £100bn more than the £194.1bn previously forecast by the OBR.

Britain's net debt is set to reach £2 trillion for the first time by 2023-24 as a result, the watchdog revealed.

Robert Chote, its outgoing chairman, said the spending splurge would leave the public finances "vulnerable".

He described it as looking like the “biggest sustained giveaway since Norman Lamont's ill-fated Budget in 1992"; a pointed reference to the spending announcements of that year that had to be reversed just months later when sterling crashed out of the European exchange rate mechanism.

The OBR also said it gave the Chancellor just a 60 per cent chance of meeting his target to balance the current budget, which would be trimmed further after the coronavirus hit is taken into account.

It added he would also miss the fiscal targets set by his predecessor Philip Hammond by £9.2bn.

But Mr Sunak made clear he had until 2022-23 to meet his more recent current Budget target, while the Government has said it plans to review the fiscal framework ahead of the next Budget in the autumn.

In its economic and fiscal outlook released alongside the Budget, the OBR admitted it was "impossible" to accurately predict the impact of the outbreak on the economy.

The Institue for Fiscal Studies, the respected economic think-tank, warned the Chancellor that he might be forced to reconsider his spending plans if UK economic growth continued to stall.

Paul Johnson, its director, said Mr Sunak could face having to increase taxes, abandon his fiscal rules or even scale back public spending if "once again growth disappoints".

• READ MORE: Chancellor insists disease aid package will make UK 'best-placed' to deal with disease

“This leaves the Chancellor with the choice of whether to rein back again on spending or to announce further tax rises or to abandon his fiscal targets and to allow debt to rise further," he added.

In the Commons, Jeremy Corbyn welcomed the steps being taken to reduce the economic impact from coronavirus but said the UK was going into the crisis with public services "on their knees" and an economy that was "flat-lining".

The Labour leader told MPs: "Today's Budget was billed as a turning point, a chance to deliver, in particular on the promises made to working-class communities during the general election. But it doesn't come close.”

He claimed the the Government's boast of the biggest investment since the 1950s was a sleight of hand. "It's in fact only the biggest since they began their slash and burn assault on our services, economic infrastructure and living standards in 2010,” insisted Mr Corbyn.

He pointed out that having “ruthlessly forced down the living standards and life chances of millions of our people for a decade, the talk of levelling up is a cruel joke”.

The Labour leader added: "The reality is this is a Budget which has an admission of failure; an admission that austerity has been a failed experiment. It didn't solve our economic problems but made them worse; that held back our own recovery and failed even in its own terms."

Ian Blackford for the SNP said his party was committed to demonstrating an approach of “calm and practical leadership” and, in welcoming the extra NHS money to tackle the coronavirus outbreak, asked how much of it would go to Scotland.

Noting how “urgent measures” were needed to help the tourist and hospitality sectors, the party leader called for a temporary drop in the VAT rate to five per cent to help businesses reduce their costs.

This, he said, would allow business to weather the storm as people followed public health advice and tourist numbers drop. "But on the basis of the scientific advice we have today Scotland is well and truly open for business and I encourage people to come and experience the breadth and depth of our tourism offering.”

On the Budget beyond coronavirus, Mr Blackford branded it “half-baked,” claiming it had been “thrown together by a bunch of Vote Leave campaigners drowning in the responsibility of Government”.

He added: “After delivering a decade of cruel cuts, the Tories are now offering a new decade of political and economic isolation outside the European Union.

"The Budget is a warning of what may be ahead of us and a reminder of Scotland’s need to choose a different future.”