Chancellor Rishi Sunak unveiled a comprehensive stimulus package totaling GBP 30 billion [$39 billion] on Wednesday to support the UK economy as the coronavirus, or Covid-19, keeps spreading hurting people and businesses.
The chancellor also presented the latest round of forecasts from the Office for Budget Responsibility that showed that the UK economy is set to grow at the slowest pace in more than a decade this year.
The slews of measures announced in the budget included a relaxation of sick pay rules, tax relief and cash grants for stressed smaller businesses, and a GBP 5 billion funding boosts for the NHS to fight the virus outbreak.
Hours before the budget, the Bank of England came out with its monetary stimulus for the economy that included a 50 basis point cut to the bank rate to a record low 0.25 percent and a new funding scheme for small and medium enterprises.
Bank of England Governor Mark Carney said the bank is coordinating its actions with the Chancellor on the budget day, in order to ensure that measures have “maximum impact”.
Sunak, who became the chancellor just last month, called the budget as one that “provides security today” and a “a plan for prosperity tomorrow”.
“I will do whatever it takes to support the economy,” Sunak said.
“There is likely to be a temporary disruption to our economy,” he added. ” I’m confident that our economic performance will recover,” he said.
Without fully considering the impact of the virus outbreak, GDP would grow 1.1 percent in 2020 and 1.8 percent in 2021, the chancellor said. Growth is then seen easing to 1.5 percent in 2022.
The growth projected for this year is the weakest since 2009.
Growth over the next two years will be 0.5 percentage points higher than it would have been due to the measures announced in the stimulus, Sunak said.
The OBR forecast inflation at 1.4 percent this year, 1.8 percent next year and around the 2 percent target for the rest of the forecasting period.
The chancellor extended the statutory sick pay to all those who are advised to self-isolate, even if they have not yet presented with symptoms.
For the self-employed or for those in the gig economy, the chancellor said they can claim allowance from day 1 instead of day 8.
The budget also created a GBP 500 million Hardship Fund for local authorities to help the distressed people.
Sunak announced a temporary Coronavirus Business Interruption Loan Scheme in which banks will offer loans of up to GBP 1.2 million to support small and medium sized businesses.
Further, losses of up to 80 percent on those loans will be guaranteed by the government without any fees.
The business rates for shops, cinemas, restaurants, and music venues were abolished for this coming fiscal year.
The business rate waiver was extended to more establishments in the leisure and hospitality sector such as museums, art galleries and sports clubs, as the Covid-19 outbreak is set to have a significant impact on these.
The chancellor also announced a GBP 3,000 cash grant each to the 700,000 smallest businesses in the country.
Sunak said the government will undertake an additional fiscal loosening of GBP 18 billion to support the economy this year.