The UK government has set aside £30bn in emergency relief to deal with the shock of the coronavirus which chancellor Rishi Sunak has warned will have a “significant impact”on the UK economy initially.
Delivering his first budget before parliament, Sunak (pictured), who had less than a month to prepare the spring statement after taking up the reins from former chancellor Sajid Javid, pledged £30bn of “extraordinary” fiscal measures to support businesses, workers, the NHS and other public services that would feel the strain of the coronavirus.
His three-point plan sets aside £7bn to employed vulnerable people, like self-employed workers who would be disproportionately affected by not being able to work, as well as a £5bn emergency response fund to support the NHS. A further £18bn of “fiscal loosening” would be provided to support the economy this year.
Sunak described the government’s course of action as “one of the most comprehensive economic responses” to coronavirus “of any government anywhere in the world to date”.
He said the government had been coordinating closely with the Bank of England which earlier today unveiled an emergency 50 basis points rates cut to 0.25%.
OBR forecasts weaker growth even before coronavirus impact
The Office for Budget Responsibility “slightly reduced” its forecast for GDP growth compared with the March 2019 spring statement when it predicted the economy would grow 1.4% this year, in figures published alongside the spring statement.
The OBR predicted the UK economy would grow 1.1% in 2020 and 1.8% in 2021, followed by growth of 1.5%, 1.3% and 1.4% in the following years. Inflation is expected to hit 1.4% this year, before ratcheting up to 1.8% in 2021, at which point it will hover at or around the BoE’s 2% target.
But the OBR figures did not take into account the short-term hit from the coronavirus, which could see up to one fifth of the working age population off work at any one time.
The coronavirus has already laid siege to global supply chains and weighed heavily on UK businesses, particularly those in the travel, retail and leisure sectors.
The combination of people being unable to work and businesses being unable to access goods means “for a period our productive capacity will shrink” and consumer demand would drop, Sunak said.
“The combination of effects will have a significant impact on the UK economy, but it will be temporary,” he said before parliament.
“We will get through this together. The British people may be worried but they are not daunted.”
