The Sunak Budget: not perfect, but promising
The 11th March was Rishi Sunak’s big day: he was to present his first budget as Chancellor of the Exchequer. The combination of his sudden promotion, having less than a month to draw up the budget and the growing concerns over the economic effects of the Coronavirus (COVID-19) meant that Rishi Sunak had no easy task ahead of him.
Even so, on the 11th March at 12:30pm, Sunak delivered his first budget as Chancellor in the House of Commons. First on the list were measures designed to deal with the fallout from the Coronavirus. The Chancellor outlined the allocation of £5 billion for an emergency response fund for the NHS and other public services. There will also be statutory sick pay for all who have been advised to self-isolate, even if they don’t have any symptoms. This will be of great relief to many people who were worried about having to go to work, even if they were sick, in order to get paid. A £500m hardship fund has been established for councils in England who have been the hardest hit by the outbreak of the virus. There will also be £2bn allocated for sick-pay rebates for up to 2m small businesses with fewer than 250 employees- a critical measure designed to help those that are most economically vulnerable from the outbreak. Lastly, £6bn has been pledged for extra NHS funding over five years to pay for staff recruitment and start hospital upgrades. Sunak and the rest of the Treasury ministerial team seem to have adequately grasped the scope of the situation and have implemented measures to minimise the effects of the virus.
The budget was not all about Coronavirus however, as other areas that the government was keen to focus on were discussed. Notable achievements include a scrapping of the 5% VAT tax on female hygiene products, also known as the “tampon tax”, and the freezing of beer, cider, wine and spirits duty for the tenth year in a row. Staying true to Boris Johnson’s “levelling up” pledge, Sunak announced a £1.8 billion devolution deal for West Yorkshire with an elected mayor to be created in the region. In response to the terrible flooding that has affected various parts of England this past winter, £120 million will be provided for emergency flooding relief and a further £200 million for future flood resilience.
Perhaps the most notable pledge in the budget was the promise to invest £600bn in infrastructure including roads, rails and broadband. This sends a clear signal to the UK that under this government, austerity is finally over. This massive infrastructure investment is also part of the strategy to retain voters in Northern constituencies like Grimsby and Stoke-On-Trent North who voted for the Conservatives for the first time in 2019 and are desperate for investment. Despite showing promising steps in the path to ending austerity, these measures have not pleased everyone. John McDonnell, the Shadow Chancellor, said he welcomes the measures, but the decade of austerity imposed by the Conservatives means that the budget only partially makes up for the damage done. Alas, there is always someone who is not happy with government policy.
In order to pay for all of these ambitious policies, the government will not resort to taxation, but instead will increase its borrowing. Sunak has defended this approach, arguing that interest rates are at a “multi-decade low” and should be taken advantage of. His remarks came soon after the Bank of England announced it was cutting its interest rates. This year, the government is expected to borrow £14.6bn more than expected, bringing the total debt as a percent of GDP to 2.1%. By 2023-24, total borrowing by the government will amount to £96.6 bn. Even so, the Office of Budget Responsibility (OBR) has announced that the government is still on track to meet its target of balancing the day-to-day budget in three years’ time, but this does not take into account the potential economic effects of the Coronavirus.
Ultimately, this is a very good budget. It manages to provide relief to those who could face the worse effects of the Coronavirus whilst incorporating popular measures like devolution to West Yorkshire, the scrapping of the ‘tampon tax’ and the freeze on beer, wine, cider and spirits duty. The massive infrastructure investment is also welcomed, particularly as it shows great promise that the 10-year reign of austerity is finally coming to an end under a Chancellor who is dedicated to spending money appropriately. Although this budget will face criticism for promising to spend too much at a time when the global economy’s health is put into question, we should see this as the beginning of a new era of financial spending and a reassurance that the Johnson government will deliver on what it has promised to do.
Image: Flickr/HM Treasury