This was a Budget of two halves.
The Chancellor started on a sombre note as he gave a detailed statement on the coronavirus and the Government’s response.
To manage temporary disruption to the economy, he pledged that the Government would:
- ‘Provide whatever resource the NHS needs’ through a £5 billion emergency response fund
- ‘Strengthen the safety net for people affected by the virus’ through statutory sick pay for self-isolators and a £500 million hardship fund for local authorities
- ‘Support small and medium-sized businesses’ through a statutory sick pay refund, a temporary business interruption loan scheme, temporary rate relief for the most exposed businesses, and a £3,000 cash grant for the smallest firms.
Collectively, the fiscal stimulus package amounts to an eye-watering £32 billion.
MPs behind the dispatch box were visibly surprised by the scale of the intervention, but it did not stop there as the Chancellor moved from ‘providing security today’ to ‘planning for prosperity tomorrow’.
‘Planning for Prosperity’
Added up, the Chancellor’s forward-looking ‘prosperity’ pledges come to an additional £175 billion over five years with money allocated to transport, digital and energy infrastructure; public services; research and development and the wider enterprise environment.
Despite the sombre start, the self-assured delivery and bullish outlook in the face of an unprecedented global event looked like an early pitch for higher office.
The Chancellor said that while the commitments in Budget 2020 have remained within the limits of the existing fiscal rules, the framework would be reviewed – suggesting that a relaxation on borrowing could follow in the autumn in the face of low interest rates.
The Green Book, which sets the criteria by which infrastructure projects are judged, will also be reviewed – tying in with the Government’s commitment to shift investment out of the South East and towards the regions.
More Fiscal Events this Year
The Budget also launched a consultation on the Comprehensive Spending Review (CSR), which will close in July.
The exact timing of the CSR, which will set out detailed spending plans for public services and investment, will be confirmed by the Government once it has a clearer understanding of the coronavirus’ economic impact.
Collectively the Budget amounts to some very big spending commitments but with little detail on exactly when, where and how large chunks of the money will be spent.
What happens next
Four days of debate will now follow as MPs get to grips with the detail of Budget 2020, before the Finance Bill, which enacts the proposals for taxation, is tabled in Parliament.
The Budget will also be scrutinised by the Treasury Select Committee, with expert witnesses providing evidence to committee members.
With a majority of 80, we can expect the debates and Bill to pass without too much drama, but as the ‘omnishambles’ in 2012 showed a second round of scrutiny can throw-up unexpected surprises for the Government.
Looking further ahead, the Chancellor knows that his first Budget will be like no other and further tests sit on the horizon – the CSR later this year which will see an inevitable bun fight ensue as departments square up for longer-term funding allocations, and the Autumn Budget just a few weeks before we’re due to leave the EU for good.