Welcome to City A.M.’s 2020 Budget Day live blog. Please refresh your browser for live updates.
Chancellor Rishi Sunak is expected to address fears over the economic impact of coronavirus, and announce waves of new infrastructure spending and changes on taxation in his 2020 Budget.
It comes after Bank of England governor Mark Carney earlier slashed UK interest rates to a historic low of 0.25 per cent.
Key Budget measures include:
- £30bn package for coronavirus
- £600bn on capital investment
- Business rates scrapped for half of the UK’s businesses for the next year
- Entrepreneurs relief will not be scrapped
- Fuel duty and all alcohol duty frozen
- £22bn extra funding for research and development
4.30pm: City reacts to 2020 Budget measures
The City had some choice words to say on Rishi Sunak’s huge spending plans after the Office for Budget Responsibility (OBR) said such levels of largesse haven’t been seen since 1992.
The Adam Smith Institute called it “seriously concerning” and accused Sunak of being in danger of ripping up fiscal rules.
The think tank added:
Spending like a drunken sailor will not create a thriving entrepreneurial economy. Expansive vanity projects won’t make us better off. Bureaucrats picking winners does not support risk-taking by entrepreneurs — the Government should be cutting red tape on innovation like limits on biotechnology, not presuming to know what is best.
Meanwhile, accountants EY warned the high street faces another challenging year after business rates failed to help larger retailers.
Alex White, EY partner and head of business rates, said:
Large retailers who have been lobbying for business rates reductions are likely to be disappointed that their requests were not addressed in this Budget. Instead, they must now wait for the outcome of the Treasury’s fundamental review of the entire business rates system.
With the footfall to shops already in steady decline in many areas, the decision to hold off on providing any additional assistance to larger businesses this year could make it another challenging year for the high street
British Chambers of Commerce (BCC) director general Dr Adam Marshall said Sunak has addressed the most pressing risks to the economy.
But he added the UK government must to more to prepare firms for the end of the Brexit transition period in December 2020.
The Budget has addressed the immediate challenges facing the economy, but the Chancellor will have to do more to support businesses as they navigate changes to trading arrangements and the end of the Brexit transition period.
3.51pm: Critics slam IR35 rollout in 2020 Budget
One thing that failed to get a mention in today’s Budget speech was IR35.
But a quick search in the government’s 2020 Budget document reveals it is on track for its April 2020 rollout across the private sector:
The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.
Critics of the move lashed out as it appeared the government’s tax on self-employed contractors will go ahead despite demands it be killed.
“At a time when the need for a flexible workforce has never been more acute, the government has missed an opportunity to repeal its changes to the IR35 legislation,” Charlotte Gregson, MD of contractor recruiting firm Comatch said.
“The focus on tax misses entirely the associated risks and challenges that being self-employed brings. The fact that the government is also changing Entrepreneurs’ Relief for the worse at the same time is doubly bad news.”
Sarah Stenton, tax director at law firm Stewarts, added: “Corporates are likely to feel the pinch following confirmation today of the government’s plans to roll out IR35 for medium to large businesses in the private sector. This will mean those companies will face both an additional administrative burden together with potentially an increased tax burden.
“We know that many large banks and pharmaceutical companies have taken the step to no longer use any contractors going forward.”
3.06pm: Government is ‘spending like a drunken sailor’
Free market think tank the Adam Smith Institute has denounced the wide ranging spending measures, accusing Sunak of “spending like a drunken sailor”.
The think tank’s head of Research Matthew Lesh said: “It is seriously concerning that the Government is looking at ripping up the fiscal rules. A Conservative Government should not implement debunked Keynesian stimulus theories.
“Some infrastructure and public services spending, as well as supporting individuals and businesses during Covid-19, is necessary. But in the longer-run, spending like a drunken sailor will not create a thriving entrepreneurial economy. Expansive vanity projects won’t make us better off. Bureaucrats picking winners does not support risk-taking by entrepreneurs — the Government should be cutting red tape on innovation like limits on biotechnology, not presuming to know what is best.”
3.01pm: Biggest spending spree since 1992, says budget watchdog
The Office for Budget Responsibility (OBR) has said that the Budget was “largest giveaway since 1992” and it will add more than £100bn to public debt by 2024.
The Office for Budget Responsibility (OBR) said the spending would take government borrowing to a six-year high of £66.7bn in 2021-22.
The OBR said that compared to its previous estimates, Sunak’s spending spree will increase the budget deficit by 0.9 per cent of GDP on average over the next five years and add £125 billion to the public debt by 2024-25.
1.52pm: Budget an ‘admission of failure’ says Corbyn
Jeremy Corbyn has claimed the Budget is an “admission of failure” of the austerity era.
“It is a budget which is an admission of failure,” he said.
“An admission that austerity has been a failed experiment.. It didn’t solve the economy, it made it worse.
“Today’s measures go nowhere near reversing damage done to our country.”
Corbyn also said the freewheeling, big spending budget won’t be enough to make up for “a decade of cuts”.
“Today’s budget was billed as a turning point – a chance to deliver on promises made to working class communities in the General Election. It doesn’t come lose.
“The talk of levelling up is a cruel joke.”
1.41pm: Building safety fund announced
A new £1bn “building safety fund” will be created to remove unsafe cladding from high rise residential buildings.
The policy is in response to the 2017 Grenfell Tower fire.
“New public funding must concentrate on removing unsafe materials from high rise residential buildings,” he said.
“All unsafe combustible cladding will be removed from every building above 18 metres high.”
1.35pm: ‘Levelling up’
The government will investment more than £600bn for “future prosperity” for the country’s regions.
“Public net investment will be the highest its been since 1955,” Sunak said.
There will be a review of the Treasury green book funding rules, a new “economic campus” in the north with over 750 staff from Treasury, and the department for business, local government and trade.
A total of 22,000 will be moved outside central London and to the regions.
There will also be a devolution deal with West Yorkshire and the region will get its own mayor.
“We will invest in broadband, rails, roads- if the country needs it we will build it,” he said.
There will also be £5bn spent to get gigabit broadband in the hardest to reach places of the country.
There will also be £2.5bn spent to fill 50m potholes.
1.28pm: Flood repair relief and defences funding
The government will dish out hundress of millions of pounds to cities hit by flooding.
Sunak said: “I am making £120m available immediately to repair all damages, all defences damaged in the winter floods.
“To support those places repeatedly flooded [I am giving] £200m directly to communities to build their flood resilience.
“I am doubling our investment in flood defences to £5.2bn pounds.”
1.21pm Fuel duty to stay frozen, gas duty to rise
Sunak has also announced that fuel duty will remain frozen for another year, in a win for drivers. The chancellor says that compared to 2010 saving plans that represents a saving of £1,200.“I have heard representations that after nine years of being frozen, at a cost of £110bn to the taxpayer, we can no longer afford to freeze fuel duty,” he said.
“I’m certainly mindful of the fiscal cost and the environmental impacts,” he added.
“But I’m taking considerable steps in this Budget to incentivise cleaner forms of transport. And many working people still rely on their cars. So I’m pleased to announce today that, for another year, fuel duty will remain frozen.”
There was speculation he could cut fuel duty for the first time in nine years over climate change pressure.Meanwhile, Sunak said he would freeze the electricity duty from April 2022 and raise the duty on gas from the same date.
Read more: Budget 2020: Beer duty increase scrapped
Sunak also said he would abolish tax relief on red diesel in two years’ time. But there will be no impact on agriculture or the rail sector.
1.19 pm: Increases in R and D funding
Research and development investment will be increased by £22bn – the “fastest and largest increase in RND spend ever”.
It will be the highest in 40 years and funding will grow next year by 15 per cent.
He added: “I’m investing in £1.4bn in our science institue at Weybridge, where they are analysing samples of coronavirus.”
There will also be a £900m investment in fusion, space and electrical vehicles.
1.15pm: Swathe of loans and business grants
The chancellor has announced £130m in new funding to extend start up loans and another £200m to invest in scale ups.
There will also be £200m for life sciences and more money for growth hubs.
In total there will be £5bn more in export loans for businesses.
Trade envoys dedicated to businesses in country’s regions will be created.
1.08pm: Duty on all alcohol frozen
£1m of support has been announced to support Scottish food and drink overseas.
Planned increase in spirits duty has also been cancelled.
Planned rise in beer duty is also cancelled and wine and cider duty has been frozen.
1.06pm: National insurance threshold rises
Sunak also confirmed a plan to raise the National Insurance threshold. He will raise the threshold to £9,500 next month.
That will give 31m people a tax cut, the chancellor said.
The average employee stands to save £104, he said.The Instutute for Fiscal Studies (IFS) has estimated the average saving would stand at £85, less than the chancellor’s estimate.
1.03pm Fiscal rules unchanged
The budget will stay within the fiscal rules written by Sajid Javid in the 2019 Tory election manifesto.
However, a review of the fiscal framework will begin immediately.
“A review of the fiscal framework [will be undertaken] and I will report back in the autumn if I conclude any changes are necessary,” he said.
“Today’s budget is delivered not just within fiscal rules in our manifesto, but with room to spare.”
1.00pm: OBR economic indicator predictions
Sunak says that the OBR expects that Sunak’s budget measures will increase productivity and GDP, not taking coronavirus into account.
However, OBR does expect coronavirus
He says he will fund an additional £175bn in spending over the next five years “for our future prosperity”.
He said: “OBR has said growth over the next two years will be half a percentage point higher than it would have been.
“GDP forecast without coronavirus would have led to 1.1 percent in 2020 and 1.8 per cent in 20-21.
“Todays planned increase in public investment should increase output too.
“The UK’s long term productivity will increase 2.5 per cent.”
Inflation is predicted to be 1.4 per cent this year and 1.8 per cent next year.
12.56pm: Business rates abolished for a year for some businesses
Sunak has announced that almost half of all businesses will not pay any business rates for the next year to ease coronavirus-related economic downturn.
He said: “Any eligible retail, leisure or hospitality business worth below £51m will pay no business rates whatsoever.
“The tax cut will be worth £1bn pounds and each business will save up to £25,000. “Nearly half of all businesses will not pay business rates for the next 12 months.”
12.45pm: Rishi Sunak calls coronavirus ‘biggest challenge facing UK’
Chancellor Rishi Sunak today said coronavirus would cause “significant disruption” to the UK economy as he laid out government measures to battle the crisis.
But Sunak said the coronavirus outbreak would only be temporary, after the Bank of England cut UK interest rates to a historic 0.25 per cent low today.
Sunak said: “There is likely to be a temporary disruption to our economy. On the supply side up to a fifth of the working population could be off work at any one time and business supply chains are being disrupted around the globe. This will mean for a period our productive capacity will shrink. There will also be an impact on the demand side of the economy due to a shrink of consumer spending.”
In response, the government will provide the NHS with whatever it needs, Sunak added.
“Whatever extra resopurces NHS needs to cope with coronavirus it will get,” he said.
“Whether it’s research for vaccines, helping recruit thousands of returning staff millions or billions whatever it needs whatever it costs we stand behind our NHS.”
A £500m hardship fund will also be distributed to vulnerable people by local authorities.
And the government will refund sick pay businesses with fewer than 250 employees pay out to staff. Sunak said that will be worth £2bn for up to 2m businesses.
“We are doing everything we can to keep this country and our people healthy and financially secure,” Sunak added.
“During this immediate crisis if people fall ill or can’t work we must support their finances. We’ll make suire our saftey net remains strong enough to fall back on.”
Banks will also offer up to £1.2m backed by the government up to 80 per cent of losses to small businesses to help them get through the coronavirus crisis.
11.45am: Rishi Sunak leaves Downing Street to deliver 2020 Budget
Chancellor Rishi Sunak has left 11 Downing Street to deliver the 2020 Budget in parliament.
Sunak is set to outline a raft of measures to prop up the UK economy in the face of coronavirus.
Pressure has rarely been higher on a chancellor ahead of today’s Budget announcement. UK GDP fell to zero growth in January before the UK had recorded a single case of coronavirus, data revealed today.
And the Bank of England slashed UK interest rates to a historic low of 0.25 per cent. That low an interest rate was last seen in the 2008 financial crisis.
Sunak took the reins from Sajid Javid in Boris Johnson’s February cabinet reshuffle. He is expected to announce a huge increase in UK public spending to push investment up to three per cent of GDP.
It is currently 2.2 per cent of GDP.
Meanwhile, measures to mitigate coronavirus’ economic impact could include slashing business rates and even cutting VAT from 20 per cent to 17.5 per cent.
That could cost the Treasury £17bn but could also help boost consumer spending.
11.32am: Gove warns coronavirus could derail Brexit trade talks
Meanwhile, Michael Gove this morning warned the coronavirus crisis could derail UK-EU post-Brexit trade talks.
The UK is holding discussions in Brussels and London over the UK and EU’s trade relationship. But Gove today said the coronavirus crisis could prevent
“We were looking forward to Joint Committee meeting in UK on 30th this month and also looking forward, of course, to the next next stage of negotiations going ahead,” Gove said.
“But we have had indications today from Belgium that there may be specific public health concerns.”
Earlier today health minister Nadine Dorries confirmed she has self-isolated after contracting coronavirus.
11.08am Entrepreneurs’ tax relief expected to go
Sunak is expected to axe entrepreneurs’ tax relief in the budget today.
The scheme cuts the amount of capital gains tax paid, when they sell the business, from the usual 20 per cent to 10 per cent on up to £10m of lifetime gains.
Cutting it will add an estimated £2.7bn to Treasury’s coffers every year.
Speculation the chancellor will scrap the scheme sparked outrage from some in the business community.
The Federation of Small Businesses said the move would “destroy retirements”.
10.37am Sunak addresses cabinet
Sunak has informed the cabinet of the steps he will take to manage the impact of coronavirus.
Number 10 said the chancellor told cabinet the Budget would “make the UK one of the best placed economies” to deal with coronavirus.
They added: “The Chancellor also said that despite coronavirus being ‘front and centre in our minds’, the Budget will implement the manifesto on which the Government had been elected.”
10.27am 2020 Budget: CBI tells Sunak to ‘do his part’
The CBI has said Sunak has to “do his part” in today’s budget to rally the economy.
CBI chief economist Rain Newton Smith reacted positively to the Bank of England’s rate cut today.
However, she said it was now up to the chancellor to also lead the economy’s fightback against coronavirus uncertainty.
“Measures to help the flow of credit and support businesses potentially facing cash flow issues could make a real difference in the weeks ahead,” she said.
“All eyes are now on the Chancellor today to do his part.
“This is a timely, proportionate response to a serious situation, though it’s vital policy is kept under review as things improve.”
10.03am ‘Levelling up’
Today’s Budget is a landmark day for Boris Johnson’s new government.
Waves of new infrastructure spending will be announced as the Prime Minister looks to depart from austerity.
Johnson promised one of his key priorities would be to “level up” less well-off parts of the UK.
Today, it will be up to Sunak to deliver on that promise and, in the words of ex-Australian PM Paul Keating, make this a Budget that “brings home the bacon”.
The Treasury told the BBC that today’s Budget would result in the “highest levels [of investment] in real terms since 1955”.
Sunak will announce up to £600bn of capital investment by 2025.
He will also announce a £2.5bn fund to close potholes.
The Sun reported this morning that, after much speculation, Sunak will freeze fuel duty for the 10th consecutive year.
9.42am Welcome to Budget Day
Chancellor Rishi Sunak will deliver his first Budget today, just 27 days after being handed the keys to the Treasury.
It will come on the same day that the Bank of England has cut its Bank Rate by 50 basis points 0.25 per cent to cope with fears of a coronavirus-related downturn.
The cut has left the official interest rate at its lowest point in the Bank of England’s 325-year history.
The Bank’s Monetary Policy Committee said: “Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.”
The announcement sent the FTSE 100 benchmark index up by almost two per cent after the announcement, before losing momentum.
It’s up just 0.63 per cent as of 9.37am.
Stocks have suffered a series of shocks over the past three weeks in the wake of coronavirus uncertainty, leading the FTSE 100 to lose more than 15 per cent since 26 February.
Sunak will also inject fiscal stimulus into the economy today to counteract fears of a downturn.
On Sunday, he said: “There are policy levers we can take to ease the short term burden on business’ cash flow.
“These are businesses we think are viable, sustainable and we think have a bright future, but are going to have a temporary period of disruption.
“That’s where our interventions should be focussed.”