On 11th March 2020, the Chancellor of the Exchequer, Rishi Sunak, delivered the UK budget in the House of Commons, after just 27 days in the position. The budget itself is significant for a number of reasons. The planned Autumn Budget in 2019 was delayed due to the General Election in December, and this Budget provided the first clear indication of government spending plans under the newly elected Conservative government.
Additionally, part of the Budget speech was rewritten to include emergency announcements designed to limit the economic impact of Coronavirus and to prepare the public health system and smaller businesses for likely challenges in the event of a serious outbreak. Other areas of the Budget with significant relevance to the procurement sector are infrastructure, business taxes and increased spending on greener initiatives.
BiP Solutions outlines the key areas of the UK budget and the spending allocations for specific sectors below.
As expected, the economic response to the Coronavirus outbreak formed the most urgent element of the UK Budget speech. The Chancellor himself said that the Budget “holds one of the most comprehensive economic responses to this outbreak anywhere in the world.”
The Chancellor is anticipating the UK economy will be temporarily disrupted by the virus, with up to one fifth of the UK population possibly being off work at any one time. The government, therefore, is providing £30 billion fiscal stimulus to support the NHS, people, jobs, welfare and the economy in this period of Coronavirus. This includes £7 billion for businesses and families and £5 billion for the NHS. Mr Sunak announced the following measures:
The NHS and statutory sick pay
- The NHS will receive “whatever it needs” to cope with the coronavirus. This includes funding into additional research and additional staffing on top of the £6 billion of new funding to provide 50,000 more nurses, 40 new hospitals and 50 million more GP appointments that the government has introduced. Although there was no exact figure given for extra funding resources for Coronavirus, Mr Sunak was clear in his statement: “whatever it needs, whatever it costs, we stand behind our NHS.”
- The government will support people who fall ill or cannot work. The Prime Minister, Boris Johnson, has already announced that statutory sick pay will be paid from day one of the illness, instead of day four.
- Statutory sick pay will be available for all those who are advised to self-isolate, even if they have not yet presented with symptoms. Sick notes to give to employers will be obtained by contacting NHS 24 on ‘111’.
- People who are on contributory Employment and Support Allowance benefits will be able to make a claim on day one of their sickness, instead of day eight. The income threshold for claiming Universal Credit will be removed, making it easier to claim.
- A new £500 million Hardship Fund will be distributed to local authorities to directly support vulnerable people in their local area.
A number of measures have been put in place to directly support small businesses which will particularly struggle economically when affected by Coronavirus.
- The Government has introduced a £3,000 cash grant available to 700,000 of the smallest businesses, paid by local authorities, which is worth a total of £2 billion.
- Abolishing business rates altogether for this year for small firms in England whose rateable values are below £51,000, a tax cut worth a total of £1 billion.
- Statutory sick pay for businesses with less than 250 employees (SMEs) will be refunded by the Government in full for up to 14 days per employee.
- The launch of a new Coronavirus Business Interruption Loan Scheme that will see banks offer loans of up to £1.2 million to support SMEs.
In the lead-up to the UK budget announcement, the Prime Minister promised the budget would be “an infrastructure revolution”. The Budget focused on the government’s levelling up agenda – its manifesto commitment to improve infrastructure and facilities for those outside London and the South East. This commitment lies behind the announcement of infrastructure projects in strategic and local roads, broadband connectivity, improving Further Education facilities and buildings, and the Affordable Housing programme, as well as additional funding towards flooding defences for communities in the north of England.
Roads and potholes
- The government will spend £27 billion to building and developing more than 4,000 miles of strategic and local roads in England between 2020-2025.
- A £2.5 billion pothole fund, which is expected to fill in 50 million potholes. This equates to £500 million dedicated to filling potholes each year.
Broadband and connectivity in rural locations
- £5 billion of funding dedicated to implementing gigabit-capable 4G broadband to far reaching and remote places in the UK, bridging infrastructure with digital transformation.
- Investing £510 million into the shared rural mobile phone network so that 4G coverage in the next five years will encompass 95% of the UK.
- A £10.9 billion increase in housing investment to support the building of at least 1 million homes by the end of this Parliament, and an average of 300,000 new homes a year by the mid-2020s.
- Extending the Affordable Homes Programme with a new, multi-year settlement of £12.2 billion.
- Nearly £1.1 billion from the Housing Infrastructure Fund to build nearly 70,000 new homes in high demand areas of the country.
- £1 billion for a ‘Grenfell fund’ to help remove dangerous cladding from tall buildings.
Greener initiatives and flooding
- £500 million to support the roll-out of new rapid charging hubs for electric cars, so that drivers are never more than 30 minutes from a charging station. This is in a bid to support and encourage electric vehicles throughout the UK.
- £640 million to plant more than 40 million trees and restore 35,000 hectares of peatland over the next five years.
- Introduction of a plastic packaging tax to tackle plastic waste.
- £5.2 billion of funding towards doubling flood defences over the next five years, which, it is hoped, will protect 300,000 properties.
Allocated Budget Spend for the devolved administrations
- An extra £640 million for Scotland
- An extra £360 million for Wales
- An extra £210 million for Northern Ireland
The Budget overall
Overall, the Chancellor announced investment of £170 billion over the next five years, saying that the Office for Budget Responsibility (OBR) estimates that this will boost growth by 0.5% and productivity by 2.5%. In addition:
- According to the Chancellor, day-to-day departmental spending is set to grow at the fastest rate over a spending review period since the Spending Review in 2004.
- 8% per annum real growth in public service spending.
- In March 2019 – the most recent official growth forecasts from the Office for Budget Responsibility (OBR) – the UK economy was expected to grow at 1.4% for 2020, 1.6% in 2021, 1.6% in 2022 and 1.6% in 2023.
The Budget provides an economic response to evolving global events, such as Coronavirus, but it also puts measures in place to improve the country’s infrastructure sector and invest in the UK regions.
The Chancellor also announced a review of the framework underlying the fiscal rules on balancing borrowing and spending. Commentators suggest that this means that the fiscal rules could be relaxed in time for the Autumn Budget, giving the Chancellor more options to borrow to fund future spending, such as that arising from this year’s planned Spending Review.
BiP Solutions will be publishing an extensive analysis piece on the UK budget and what it may mean for our customers and clients in due course. In the meantime, find out more information on the UK budget and figures on www.gov.uk