Chancellor Rishi Sunak is set to unveil the 2020 Budget today after the Bank of England’s shock move to slash UK interest rates.
Just four weeks into the job, Sunak has spent the last 27 days planning to hike public spending. Record investment would see the government mark the end of austerity.
But he is also widely expected to use the 2020 Budget to address the coronavirus outbreak’s economic impact too. That comes after the Covid-19 crisis shattered FTSE 100 stocks in recent weeks and appears to have dampened consumer spending.
Here is everything Sunak is expected to announce in the 2020 Budget.
UK interest rate cut comes before Budget 2020
The Bank of England shocked traders today by slashing interest rates from 0.75 per cent to just 0.25 per cent, a historic low.
Governor Mark Carney took the surprise move to prepare the UK for the “economic shock” of the coronavirus fallout on the UK economy.
The Bank has warned of a short but sharp hit to the British economy as coronavirus cases continue to rise. Travel restrictions to contain the epidemic have knocked oil prices, global supply chains and consumer spending.
The Bank of England announcement came just hours before this afternoon’s 2020 Budget.
Budget 2020: coronavirus measures
Sunak is expected to outline a variety of measures to contain the coronavirus.
Those could include a waiver of UK business rates to help high street shops survive the economic downturn of coronavirus.
And the chancellor could also slash VAT rates from 20 per cent to 17.5 per cent, according to the BBC. That would cost the Treasury £17bn, it is estimated.
But there are doubts over whether that would help persuade consumers to spend if the UK coronavirus outbreak gets worse.
Sunak has also pledged to give the NHS “whatever resources it needs” to tackle the coronavirus crisis. The NHS has already had to recruit more staff to respond to demand for its 111 health phone service.
The government has already outlined changes to sick pay in light of the coronavirus crisis.
That will see firms pay sick pay from the first day of illness, rather than the fourth day. That is aimed to encourage ill workers not to come into work.
National Insurance tax cut
Sunak will reportedly hike the National Insurance threshold from £3,000 to £4,000. That means firms will not have to pay employer National Insurance on the first £4,000 of their annual bill.
The Federation of Small Businesses (FSB) welcomed the move. It pointed out small firms face an increase in the minimum wage from next month.
£5bn broadband investment
Sunak is keen to deliver a Tory manifesto pledge to upgrade broadband. That would see every UK home and business get full-fibre broadband within five years.
That would cost £5bn. Meanwhile the Treasury could announce a £1bn deal with mobile phone providers to improve 4G coverage.
Exporters to get boost in 2020 Budget
Sunak is preparing a £5bn loans package to encourage investment in the UK’s exporters. That comes as the UK prepares for life outside the EU after Brexit.
The cash is meant to encourage green growth and boost the defence industry.
It’s possible the 2020 Budget will raise fuel duty, marking an end to nine consecutive years of frozen fuel duty.
Such a measure would form part of the government’s bid to tackle climate change. But it could also help Sunak fund his major spending pledges.
Entrepreneurs’ relief to go in Budget 2020
The government is almost certainly set to scrap entrepreneurs’ relief in the Budget for 2020.
That would help the government recoup £2.7bn in taxes. It would achieve that by cutting the capital gains tax relief entrepreneurs get from selling their businesses.
Abolishing entrepreneurs’ relief could hurt small business owners, however. The Federation of Small Businesses has said the move could hit people selling firms to fund their retirements.
A huge rise in public spending
Rishi Sunak is set to unveil the largest rise in public borrowing in 30 years today. Plans to hike infrastructure spending by £100bn would mark the end of Tory austerity.
But it would also hike public spending from 2.2 per cent of GDP to around three per cent. That would put Boris Johnson’s government at risk of breaching fiscal rules. That is something former chancellor Sajid Javid has warned against.
But it would also help Johnson deliver a manifesto pledge to “level up” the UK. The money would focus on railways, roads and housing in the Midlands, the north, Scotland, Wales and Northern Ireland.
The chancellor is expected to pledge £600bn over a decade in “record amounts” of infrastructure spending. Around £2.5bn will be spent on filling in pot holes.
“This is a Budget for people right across the country – no region will be left behind,” Sunak said yesterday.
Digital services tax
The government hopes to raise £500m a year from a digital services tax.
This would see the UK tax tech giants – mostly from the US – for sales they make in Britain. However, the Trump administration has threatened France with extra tax duties on imports in response to a similar tax.
Former chancellor Sajid Javid had vowed to press ahead with the digital services tax despite the risk of repercussions. But Sunak could backtrack on the pledge as the UK tries to negotiate a favourable UK-US post-Brexit trade deal.