The Budget 2020 Speech Delivered by Chancellor Rishi Sunak
11 March 2020
Madam Deputy Speaker,
I want to get straight to the issue most on everyone’s mind – coronavirus COVID-19. I know how worried people are – worried about their health, the health of their loved ones, their jobs, their income, their businesses, their financial security. And I know they get even more worried when they turn on their TVs and hear talk of markets collapsing and recessions coming. People want to know what’s happening, and what can be done to fix it.
What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure. We are clear that this is an issue above party. We will do right by you and your family and I know I will have the support of the whole House as I say that. This House has always stood ready to come together, put aside party politics, and act in the national interest. We have done so before and I know we will do so again.
My Right Honourable Friend the Prime Minister, alongside officials and scientists, is leading the work on the public health response.
Today, I want to set out our economic response, so we bring stability and security. Let me say this: We will get through this – together. The British people may be worried, but they are not daunted. We will protect our country and our people. We will rise to this challenge. But let me also say: Yes, this virus is the key challenge facing our country today. But it is not the only challenge.
We have just had an election where people voted for change: change in our economy, change in our public services, change in the cost of living, change in our economic geography. This Budget delivers on that change. Yes, as we deal with coronavirus, it is a Budget that provides security today. But it is also a plan for prosperity tomorrow. It is a Budget that delivers on our promises to the British people. It is a Budget of a Government that gets things done.
Madam Deputy Speaker,
Before I set out the details of our plan, let me first thank Members who’ve contributed to the discussions on how to respond to coronavirus; Members from both sides of this House.
Our economy is robust, our public finances are sound, our public services are well-prepared.
My Right Honourable Friend the Health Secretary is working around the clock to protect the public’s health. And I will do whatever it takes to support the economy.
First, let me explain the nature of the economic challenge and my overall strategy. The challenge is this: There is likely to be a temporary disruption to our economy.
On the supply side, up to a fifth of the working-age population could need to be off work at any one time. And business supply chains are being disrupted around the globe. This combination of people being unable to work and businesses being unable to access good will mean that for a period, our productive capacity will shrink. There will also be an impact on the demand side of the economy, through a reduction in consumer spending.
The combination of those effects will have a significant impact on the UK economy. But it will be temporary. People will return to work. Supply chains will return to normal. Life will return to normal. For a period, it’s going to be tough. But I’m confident that our economic performance will recover.
So given this analysis of the situation, let me set out our strategy to deal with it. We can’t avoid a fall in demand, because the primary driver of that reduction in consumption, the primary reason people are not spending as normal is because they’re following Doctors’ orders to stay at home.
So, the right immediate policy response is to provide security and support for those who get sick or can’t work through funding our public services, and a strengthened safety net.
And on the supply side, the right response is to provide a bridge for businesses, to ensure that what is a temporary impact on our productive capacity does not become permanent. In other words, our response will be temporary, timely and targeted. This is the right response – and at the right time.
That response is clearly and closely coordinated with the Bank of England. The Governor and I have been in constant communication about the evolving situation and our responses have been carefully designed to be complementary and to have maximum impact, consistent with our independent responsibilities. The Governor set out this morning the actions that the Bank will take to help UK businesses and households bridge across the likely economic disruption: a 50-basis point reduction to interest rates, to support business and consumer confidence and cash flows; the introduction of an SME Term Funding Scheme, to help reinforce the transmission of the reduction in Bank Rate to the real economy; and they have released the counter-cyclical buffer, to further support the ability of banks to supply credit.
The Government’s response will use fiscal action to support public services, households and business. Together, we are taking action that is coordinated, coherent and comprehensive. And let me now set out our three-point plan.
First…first, whatever extra resources our NHS needs to cope with coronavirus – it will get.
So, whether its research for a vaccine, recruiting thousands of returning staff, or supporting our brilliant doctors and nurses; whether its millions of pounds or billions of pounds; whatever it needs, whatever it costs, we stand behind our NHS.
Second, during this immediate crisis, if people fall ill or can’t work, we must support their finances.
We’ll make sure that our safety net remains strong enough to fall back on. My Right Honourable Friend the Prime Minister has already announced that Statutory Sick Pay will be paid from day one, rather than day four. Today, with the assistance of My Right Honourable Friend, the Work and Pensions Secretary, I can go further.
Statutory sick pay will also be available for all those who are advised to self-isolate – even if they haven’t yet presented with symptoms. And rather than having to go to the doctors, you will soon be able to obtain a sick note by contacting 111. But of course, not everyone is eligible for Statutory Sick Pay. There are millions of people working hard, who are self-employed or in the gig economy. They will need our help, too.
So to support them, during this period, we’ll make it quicker and easier to access benefits: Those on Contributory Employment and Support Allowance will be able to claim from day one instead of day eight; and to make sure that time spent off work due to sickness is reflected in your benefits, I’m also temporarily removing the minimum income floor in Universal Credit; and I’m relaxing the requirement for anyone to physically attend a job centre; everything can be done by phone or online.
Taken together, these measures on ESA and Universal Credit provide a boost of almost £0.5bn to our welfare system. And to further support our people, I am also creating a £500m Hardship Fund, distributed to local authorities, who will be able to use that fund to directly support vulnerable people in their local area. So, in total, that’s a £1bn commitment to support the financial security of our people.
But, Madam Deputy Speaker, the best way to support people is to protect their jobs.
And we do that by supporting our businesses – the third part of our plan.
The measures I’ve announced today on Statutory Sick Pay are crucial to support those who need to take time off work, but that cost would be borne by business. And if we expect 20% of the workforce to be unable to work at any one time, the cumulative cost would hit our small- and medium-sized businesses hard.
So, in recognition of these exceptional circumstances, today, I am taking a significant step.
For businesses with fewer than 250 employees, I have decided that the cost of providing Statutory Sick Pay to any employee off work due to coronavirus will, for up to 14 days, be refunded by the Government in full. That could provide over £2bn for up to 2 million businesses. This will significantly ease the burden on businesses, but we can do more.
I have asked HMRC to scale up the Time to Pay service, allowing businesses and the self-employed to defer tax payments over an agreed period of time. Starting today, there will be a dedicated helpline with 2,000 staff standing ready to help. Now, although Time to Pay is important, it will still be the case that some good, well-run businesses will face problems with their cash flow. They may struggle to pay people’s salaries, pay their bills, or buy new stock. They will need loans to get through this period.
So, today, I am announcing a new, temporary Coronavirus Business Interruption Loan Scheme.
Banks will offer loans of up to £1.2m to support small- and medium-sized businesses. The Government will offer a generous guarantee on those loans, covering up to 80% of losses, with no fees, so that banks can lend with confidence. This will unlock up to £1bn of attractive working capital loans to support small businesses, with more as needed.
Taken together, I expect the combination of these measures to protect the vast majority of businesses through the worst of the crisis. But I have two other measures that will use the tax system to support businesses through this.
Our manifesto promised that for shops, cinemas, restaurants, and music venues with a rateable value of less than £51,000, we would increase their business rates Retail Discount to 50%. Today, I can go further, and take the exceptional step, for this coming year, of abolishing their business rates altogether.
But there are tens of thousands of other businesses in the leisure and hospitality sectors, currently not covered by this policy. Museums, art galleries, and theatres; caravan parks and gyms; small hotels and B&Bs; sports clubs, night clubs; club houses, guest houses. They would not benefit from today’s measure – but they could be some of the hardest-hit. So for this year, I have decided to extend the 100% retail discount to them as well.
That means any eligible retail, leisure or hospitality business with a rateable value below £51,000 will, over the next financial year, pay no business rates whatsoever. That is a tax cut worth over £1bn, saving each business up to £25,000. And it means, over the next twelve months, nearly half of all business properties in England will not pay a penny of business rates.
I’m also launching today a fundamental review, to be concluded at the Autumn Budget, into the long-term future of business rates. But even with the temporary extension of the retail discount to the leisure and hospitality sectors, many of our smallest businesses already pay no business rates, so would not benefit from this policy.
So to support them to manage their fixed costs, I am going to go a step further. I am providing, to any business currently eligible for the small business rates relief, a £3,000 cash grant per business. This is a £2bn cash injection direct to 700,000 of our smallest businesses.
Let me summarise for the House the fiscal impact of our immediate response to coronavirus. Taken together, the extraordinary measures I have set out today represent £7bn to support the self-employed, businesses and vulnerable people. To support the NHS and other public services, I am also setting aside today a £5bn emergency response fund and I will go further if necessary. Those measures are on top of plans that I will set out later in this Budget, which provide an additional fiscal loosening of £18bn to support the economy this year.
That means I am announcing today, in total, a £30bn fiscal stimulus to support British people, British jobs and British businesses through this moment. And, of course, if further action is needed as the situation evolves – I hope the whole House knows, I will not hesitate to act.
I believe this represents one of the most comprehensive economic responses of any government anywhere in the world, to date. The Governor of the Bank of England and I are in close contact with our counterparts around the world, in the G7 and the G20. And to support the global response, I’m also making new funding of £150m available for the IMF’s relief efforts.
Madam Deputy Speaker,
Coronavirus will have a significant impact on our economy – but it will be temporary. I will do whatever it takes to get our nation through it. I’m acting today with a multi-billion-pound commitment:
More money for our NHS.
More generous Sick Pay.
Faster access to benefits if you’re self-employed.
Extra local support for the most vulnerable.
Tax cuts, loans and grants for businesses to protect people’s jobs.
Comprehensive action, and if more is needed, I will take it. And I know all Members of the House will want to give this plan their full support.
Madam Deputy Speaker,
Before I turn to the economic forecasts, I hope the House will join me in thanking the Office for Budget Responsibility – and Robert Chote, in particular. After ten years, this is his last Budget in charge. He’s led the OBR with dedication and integrity – and established that institution as one that is respected around the world.
Madam Deputy Speaker,
Let me now turn to the growth forecasts.
Since the OBR closed their forecast, it has become clear that the spread of coronavirus will have a significant impact on our economy in the coming quarters. But given the nature of the shock is temporary, I still want to set out for the House the OBR’s judgement on the economy over the medium term.
Even before coronavirus hit, we were facing a slowing world economy. There has been, across developed economies, including here in the UK, a decade-long slowdown in productivity. This, combined with a political uncertainty over the last three years, which has affected business investment in particular, has led the OBR to downgrade our productivity over the forecast period and to slightly reduce GDP growth, compared to the March 2019 forecast.
But while the world may slow down, we will act here with a response that is brave and bold, taking decisions now for our future prosperity. We are investing in world-class infrastructure, and to lead the world in the industries and technologies of the future. The central judgement I’m making today is to fund an additional £175bn over the next five years for our future prosperity.
The OBR have said that, as a direct result of the plans that I’m announcing, growth over the next two years will be 0.5 percentage points higher than it otherwise would have been. For the benefit of the House, the GDP forecast without fully accounting for the impact of coronavirus would have led to growth of 1.1% in 2020, 1.8% in 2021, then 1.5%, 1.3%, and 1.4% in the following years. And today, the OBR have made an estimate they’ve never made before. They have said, in their words, that today’s “large planned increase in public investment should boost potential output, too”. If future Governments have the same determination to continue our approach, the UK’s long-term productivity will increase by 2.5%. The OBR have confidence in the long-term future of our economy – and so do I.
Madam Deputy Speaker,
More investment and higher growth mean more jobs and higher wages. We already have more people working in our economy than ever before. Women’s employment is at a record high. And since 2010, full-time weekly wages have grown faster in every region and nation of the UK than they have in London. The OBR expect half a million people more will be in work by 2025.
Wages are expected to grow in real terms in every year of the forecast period. The story of this Government has been the story of a national jobs’ miracle. And, Madam Deputy Speaker, given the last few weeks I’ve had, I’m all in favour of jobs’ miracles.
On inflation…on inflation, the OBR forecast 1.4% this year, increasing to 1.8% next year and then, for the rest of the forecast period, remaining on or around target. And I’m sure the whole House will join me in taking this opportunity to thank Mark Carney, the Governor of the Bank of England for his 7 years of dedicated public service. We congratulate him on his new role as Finance Adviser for COP26, and welcome his successor Andrew Bailey, who takes up his post on Monday.
Madam Deputy Speaker,
Let me turn now to the fiscal forecasts.
The economic impacts of coronavirus remind us of the importance of fiscal responsibility. Our public finances are strong, with the deficit down from 10% in 2010 to less than 2% last year. Our economy is well-prepared for the future and it’s well-prepared because of ten years of Conservative-led governments and Conservative Chancellors. And I, too, will always act responsibly with the nation’s finances. But it’s important that we update our fiscal framework to remain at the leading edge of international best practice.
Our economic security depends on maintaining the following principles: low and stable inflation delivering price stability; fiscal sustainability; and independent, effective institutions – like the Bank of England and the OBR. These features of our framework will always be protected.
But there is a live global debate about what our low interest rate environment means for fiscal strategy about the case for fiscal policy to play a more active role in stabilising the economy, and about the best ways to measure productivity-enhancing investment in the economy, such as human capital, or measuring value on the public balance sheet.
So I want to take time to consider these questions over the coming months so that our fiscal framework allows us to make the right long-term decisions for our economic security and prosperity. I will review the fiscal framework, consulting widely with a range of experts, and will report back in the autumn, if I conclude that any changes are necessary.
But at the same time, credibility comes as much from what we do as what we say. We were elected on a manifesto that promised to meet a specific set of fiscal rules. Today’s Budget is about delivering our promises. And that’s why, despite the speculation, today’s Budget is delivered not just within the fiscal rules in our manifesto, but with room to spare. And I’m setting the amount that Government will spend for the rest of this Parliament within those rules as well.
Today, the OBR report a current budget surplus in every one of the next five years. And in the target year of 2022-23, we have fiscal space of nearly £12bn. The OBR forecast that borrowing will increase slightly from 2.1% of GDP in 2019-20 to 2.4% in 2020-21 and 2.8% in 2021-22. It then falls to 2.5%, 2.4% and 2.2% in the following years. And the OBR forecast that headline debt will be lower at the end of the Parliament than it is today, falling from 79.5% this year to 75.2% in 2024-25.
I’m sure the House will understand that given how urgently we’ve developed our economic response to the coronavirus, that package of measures have not yet been captured in the fiscal forecasts, and nor have the fiscal impacts of the Bank’s actions. But the House will also note that the target year for our current budget fiscal rule is not until 2022-23. So even within our current framework, I have the flexibility to act as required over the next two years.
Madam Deputy Speaker,
As we enter a period of challenge, we start from a position of strength: the economy growing; more jobs; higher wages; stable inflation; sound…sound public finances. We promised to manage our economy responsibly – we’re getting it done.
Madam Deputy Speaker,
This Budget responds, at scale, to the immediate threat of Coronavirus. And it reports on an economy whose foundations are strong. It is a Budget that provides for security today. But let me now outline our Plan for Prosperity tomorrow.
This is the first Budget of a new decade. The first in almost fifty years outside the European Union. And the first of this new Government. At the election, we said we needed to be one nation. While talent is evenly spread, opportunity is not – we need to fix that. This is a Budget that will deliver on our promises to the British people. And it is the Budget of a Government that gets things done.
We promised to get Brexit done, and we got it done.
We promised to let hard working families keep more of what they earn. This Budget gets it done.
We promised to back our businesses to innovate, invest and trade. This Budget gets it done.
We promised to invest in science and research. This Budget gets it done.
We promised to deliver green growth and protect our environment. This Budget gets it done.
We promised to level up, with new roads, railways, broadband and homes. This Budget gets it done.
And, yes, we promised record funding for our NHS and public services. This Budget gets it done.
This Government delivers on its promises and gets things done.
Madam…Madam Deputy Speaker,
Our Plan for Prosperity starts immediately by putting more money in people’s pockets.
It was a Conservative Government that in 2016 introduced the National Living Wage, giving Britain’s lowest paid workers the biggest pay rise in 20 years. And in just three weeks’ time, around 2 million workers will see their wage rise again by 6.2% – for a full-time worker, that’s a pay rise of almost £1,000. That is the biggest cash increase ever. But we’ve promised to go further.
Today, we’re publishing a new Remit for the independent Low Pay Commission. They now have a formal target that, as long as economic conditions allow, by 2024, the National Living Wage will reach two-thirds of median earnings. On current forecasts, that means a living wage of over £10.50 an hour. We promised to end low pay – we’re getting it done. And…and as people earn more – we’ll also cut taxes on their wages.
I am increasing, in just four weeks’ time, the National Insurance threshold from £8,632 to £9,500. That’s a tax cut for 31 million people, saving a typical employee over £100. And taken together, our changes to the National Living Wage, income tax, and now National Insurance mean that someone working full time on the minimum wage will be more than £5,200 better off than in 2010.
The Conservatives – the real workers’ party.
I can also confirm, now that we’ve left the EU, that I will abolish the tampon tax. From January next year, there will be no VAT whatsoever on women’s sanitary products. And I congratulate all Members and Right Honourable Members who campaigned for this, including the former Member for Dewsbury, who led the charge.
Now let me turn now to duties.
Scotch whisky is a crucial industry – and our largest food and drink export. My Scottish Conservative colleagues, including My Honourable Friend the Member for Moray, have highlighted to me the impact that the recent US tariffs are having. We will continue to lobby the US government to remove this harmful tariff.
But in the meantime, I’m announcing today £1m of support to promote Scottish food and drink overseas and £10m of new R&D funding to help distilleries go green. And to further support the industry, I can also announce that this year, the planned increase in spirits duty will be cancelled.