UK BUDGET: Govt unveils £30bn package to combat coronavirus impact

UK Finance Minister Rishi Sunak unveiled a £30bn package of measures to combat the economic impact of the coronavirus and reassure jittery markets as he also pledged a major fiscal boost over the next five years.

Speaking in parliament hours after the Bank of England had slashed interest rates to 0.25% and announced emergency measures of its own, Sunak told MPs the domestic economy was "robust" and public services were "well prepared" to deal with the epidemic that has caused a plunge in global stockmarkets.

There was also the biggest fiscal loosening of the government purse strings in almost three decades as he pledged billions on infrastructure spending.

Sunak, who only replaced Sajid Javid four weeks ago after a Cabinet reshuffle, said business supply chains were being disrupted globally by the coronavirus. "This combination of people being unable to work and businesses being unable to access good will mean that for a period our productive capacity will shrink," Sunak said.

"There will also be an impact on the demand side of the economy, through a reduction in consumer spending. The combination of those effects will have a significant impact on the UK economy. But it will be temporary.

"We can’t avoid a fall in demand, because the primary driver of that reduction in consumption, the primary reason people are not spending as normal, is because they’re following doctors’ orders to stay at home."

Sunak warned that up to 20% of the workforce could be forced to stay at home at any one time and unveiled a series of measures to help workers claim benefits.

"If people fall ill or can’t work, we’ll support their finances. Statutory Sick Pay (SSP) will be available for all those who are advised to self-isolate - even if they haven’t yet presented with symptoms," he said. At less than £95 a week, the UK's SSP is one of the lowest rates in Europe. MPs had earlier called for a rise to cater for the growing numbers of workers in the gig economy.

The package was criticised for forcing some workers to apply for benefits because they did not qualify for SSP.

"The government’s coronavirus plans will leave millions of workers behind. Without urgent action, too many will be plunged into poverty and debt," said Trades Union Congress general secretary Frances O'Grady.

"Today’s announcements won’t help the nearly 2m people who miss out on sick pay because they don’t earn enough. Telling them to turn to the broken benefits system isn’t good enough. We need decent sick pay for all."

The government pledged £2bn to meet the cost of SSP for businesses with fewer than 250 employees for up to 14 days per employee. Business rates for shops, cinemas, restaurants and music venues in England with a rateable value below £51,000 were suspended for a year.

Employees would also be able to claim the benefit from the first day off work, Sunak added.

There was also a pledge to provide extra cash for the the National Health Service "whether its millions of pounds or billions of pounds whatever it needs, whatever it costs".

On the broader economic front, growth forecasts were cut for 2020, 2022 and 2023, with a slight rise predicted for 2021, although all figures did not take into account the impact of the coronavirus.

For 2020, growth of 1.1% was forecast, down from 1.4% guided in the 2019 Spring Statement; 2021, 1.8%, up from 1.6%; 2022, growth of 1.5%, down from 1.6%; 2023, growth of 1.3%, down from 1.6% and a new forecast of 1.4% for 2024.

Borrowing as a percentage of GDP was forecast at 2.1% this year, rising to 2.4% in 2020-2021, 2.8% in 2021-22, before falling to 2.5%, 2.4% and 2.2% in the following three years. Debt as a share of GDP was forecast to fall from 79.5% this year to 75.2% in 2024-25.

There was also a £175bn boost for infrastructure over the next five years - including an immediate £120m to repair damage caused by recent flooding and spending on flood defences doubling to £5.2bn.

A planned rise in beer duty was cancelled, while duties for cider and wine will also be frozen as was fuel duty for another year at a cost of £525m in lost revenue, which will anger green campaigners who expected more from a government that claims it is serious about combating the effects of climate change.