Budget must have an action plan so Britain flourishes, says KATE ANDREWS

But once appointed Chancellor of the Exchequer, after a very public resignation by Sajid Javid, another shock was in store. Not only would he be delivering this Government’s first Budget, he’d be doing so in the midst of an epidemic. It’s too early to say what the long-lasting impact of coronavirus will be. It has already had a major effect on the world economy: halting travel, rolling back tourism, cancelling big events, shutting down factories and manufacturing connected to vital supply chain routes. 

The strains are being felt from tech to finance to medicine. The stock market has taken a huge hit, falling to its lowest level last week since the 2008 financial crash. It’s ticked up a bit, but the OECD claims that growth projected for 2020 is now essentially a write-off. 

Naturally most of our focus so far has been on what this virus – Covid-19 – means for our wellbeing. As I write we have 206 UK cases, but that’s set to rise significantly. 

It’s placed people in hospitals, stranded Brits abroad and driven those with symptoms into self-isolation. But in Wednesday’s Budget, the public health agenda will bridge the economic agenda. 

Sunak’s statement won’t be defined by the Government’s big ambitions, but rather by how to curtail the hit Britain’s businesses and employees may suffer from the coronavirus. 

While this is not how the Government would have liked to kick-start its new announcements for economic renewal, the Budget has arguably come at a good time to properly combat the negative consequences of the virus. 

Eventually economic costs become human costs. If businesses can’t operate or turn a profit, jobs are put at risk. If imports or manufacturing are put on hold, medicines and machinery become scarce. Much of the “no-deal” Brexit fears are put into context by the disease: there is no negotiation to be had or deal to be struck with a pandemic. 

Pressure is piling on the Government as to how it might handle sick pay for employees not entitled to claim it, or businesses struggling to stay afloat. It’s unknown how many billions might be necessary to cover these knock-on effects. 

And the bad incentives in place for some people to keep working or travelling, even if sick, will have to be addressed. 

Even without the coronavirus, this Budget already needed to find more money. The Government pledged itself to a myriad spending projects during the Election, including more infrastructure investment in the Midlands and North, and billions more for the NHS. 

There has already been talk of abandoning Sajid Javid’s “fiscal rules”, which would have allowed the Government to borrow more money, yet not blow the lid off the coffers. But even that, which will likely receive a backlash from many of its grassroots supporters, may still not be enough to cover its increasing costs.

While schemes such as “mansion tax” were ruled out quickly by government officials, other worrying possible tax hikes remain on the cards, such as axing the freeze on fuel duty. This would raise billions, but would leave motorists (who make up 83 percent of UK passenger transport) worse off. It would, crucially, upset many of the party’s new northern voters, who don’t benefit from London’s extensive public transport or inter-city connections. 

The Government’s big economic announcements are now likely to come later this year, as it prioritises its strategy for coronavirus above all else. 

But just how game-changing these plans will be remains in doubt: the decision to push ahead with the late-running and heavily over-budget HS2 project proved the perfect example of a government perhaps not ready to be as bold as it once signalled. 

The reshuffle of Cabinet ministers proved underwhelming. No 10’s plans to “shake up” Whitehall departments have, so far, amounted to rows between ministers and civil servants. The Government plans to make good on post-Brexit promises, such as scrapping VAT on tampons, but this will not compensate for a broader vision of the future. 

It has granted itself an extension for its first big announcements on the economy. As the public’s feedback on its handling of coronavirus has, so far, been positive, Sunak is likely to get a free pass, as we wait a bit longer for policies that could frame the next half-decade. 

But after three years of Brexit delays, tolerance for kicking the can is limited. He will need to indicate his direction of travel. If there’s a fuel duty rise, he’ll need to make clear what tax cuts will compensate for this down the road. 

After all, the party won its stonking majority on a pledge to give power back to the country. Whether the plans to do so are revealed now or later, Tory voters new and old will be expecting an action plan to make Britain flourish. 

Kate Andrews is economics correspondent at The Spectator 

Let's block ads! (Why?)

Share on google plus
    Google Comments
    Facebook Comments


Post a Comment