By Michael Jarvis, London UK
On the day when the coronavirus (COVID-19) recorded its highest increase in the UK - jumping by 83 to 456 cases - the Chancellor of the Exchequer (Finance Minister) Rishi Sunak set out to add muscle to the government’s battle-plan to tackle the disease.
Against mounting concerns over the threat to the economy and public health, GBP30 billion(KYD31 billion/US$38 billion) has been allocated in the budget to combat the outbreak.
In the job for just one month following the abrupt resignation of his predecessor Sajid Javid, new Chancellor Sunak might have felt that he was inheriting a budget already drafted for the most part and all he had to do was present it.
But the coronavirus outbreak has quite literally turned what was intended as Mr Javid ‘spending and levelling-up budget’ on its head.
With projections that up to twenty-percent of the UK workforce could be sidelined by the disease hitting production targets and triggering an economic slowdown, it was left to new Chancellor Sunak to redesign the budget and deliver the government’s response.
To a large extent, he has addressed the challenge of COVID-19 with an elaborate funding package - although how to pay for it is already a point of debate.
The new Chancellor would have had considerable input the pre-coronavirus planning of the budget as Chief Secretary to the Treasury under then-Chancellor Javid from July last year.
He was handed the role when his then-boss abruptly quit in February in protest over moves by Prime Minister Boris Johnson political advisors to scale back the autonomy of his ministry - putting more control over budget and financial management with the Prime Minister.
The budget would have already been in an advanced draft form reflecting the Conservative government's election-winning political pledges from last December’s election, and following up on huge spending promises made in the autumn 2019 Spending Review which underpinned the election campaign which immediately followed.
Back then the novel coronavirus was just making its presence known in Wuhan, China as a local issue. No one had anticipated the globally disruptive effects it would have in a few short months.
“Since emerging in China in December 2019, COVID-19 has spread widely, with a significant number of cases reported worldwide, including an increasing number in the UK,” Chancellor Sunak reported to a packed House of Commons on Wednesday.
“The impact of the outbreak of COVID-19 on the UK economy is highly uncertain, and while the effect could prove significant, it is expected to be temporary.”
In outlining the framework for the emergency financial measures he was putting in place in his first outing at the parliamentary Despatch Box, Mr Sunak stated:
“As an open economy, the UK will be affected because of the wider impacts the outbreak is having on the global economy. In a domestic outbreak, there could also be direct economic impacts in the UK driven by health-related factors, including how many people are infected and the persistence of any outbreak.”
He explained that “a disruption could include temporary absences from work and interruptions to global supply chains, both of which would constrain the UK’s productive capacity for a temporary period. In addition, the economy could be affected by demand-side impacts through a reduction in consumer spending, and lower business investment and exports.”
It was against that background that Chancellor Sunak outlined what amount to an elaborate plan combining financial easements and support to the National Health Service(NHS), the business sector and workers.
“The government’s Action Plan on Coronavirus sets out the potential scale of these effects in the event of a severe outbreak. Together, the government is taking £30 billion of policy action in 2020-21, equivalent to approximately 1.3% of GDP.”
Particularly for the NHS which is at the front line in the fight against COV-19, Chancellor Sunak has set aside £5 billion to fund “pressures in the NHS, support local authorities to manage pressures on social care and support vulnerable people, and help deal with pressures on other public services.”
He announced that “the size of the fund will be reviewed as the situation develops, to ensure all necessary resources are made available.”
Sick-pay support for workers and their employers is being expanded in the interim and there are a series of measures being out in place especially for small businesses.
Mr Sunak admits that the coronavirus outbreak will have potentially a significant effect on the UK economy but believes that it will only be temporary.
The relief in the face of the coronavirus outbreak, while welcomed, has raised several questions including; the outlook for economic growth and whether the relief measures go far enough especially for the NHS which was struggling before COVID-19.
There are also concerns for the hordes of self-employed (or gig economy workers) who now make up a significant slice of the labour force but are not eligible for Statutory Sick Pay.
The government's offer of making it easier for them to access welfare benefits was not seen as inadequate.
The criticisms were led by the opposition Labour Party which, while welcoming the coronavirus response plan, called it “too little, too late”.
Outgoing Labour leader, Jeremy Corbyn, said the challenges thrown up by the coronavirus crisis were made worse because of the government’s previous austerity policies.
(We’ll have more on the UK 2020 budget)