Sunak extends aid for jobs saying UK recovery to take time
Rishi Sunak warned the British economy has been hit hard by the coronavirus pandemic as he announced budget measures to save jobs, help businesses and begin the painful process of cutting the UK’s vast deficit.
With the country mired in a third national lockdown, the chancellor of the exchequer has made clear that safeguarding jobs is his priority for the coming months.
He confirmed he is extending furlough wage payments to people whose jobs have been suspended because of the pandemic restrictions, potentially costing another £9 billion-pounds (€10.42 billion). There will also be extra support for self-employed workers, and grants to help companies re-start.
“While our prospects are now stronger, coronavirus has done and is still doing profound damage,” Sunak said in a speech to Parliament in London on Wednesday. “Repairing the long-term damage will take time.”
The UK economy, which shrank almost 10% last year, is forecast to expand by 4% in 2021, the finance minister said in his budget statement to Parliament on Wednesday. Sunak was citing new projections from the Office for Budget Responsibility. It will grow 7.3% next year, stronger than the 6.6% pace forecast in November. After five years, the economy will remain 3% smaller than it would have been without the pandemic.
The extended aid for workers and businesses will help prevent a surge in unemployment. But it will also add to the 300 billion pounds the UK has spent fighting the pandemic amid the worst slump in three centuries. The chancellor is mindful of the enormous debts the pandemic has forced him to rack up, with the country on course to borrow about 360 billion pounds in the current tax year, a peacetime record.
“Once we are on the way to recovery, we will need to begin fixing the public finances -- and I want to be honest today about our plans to do that,” Sunak said. He’s hinted heavily in the past week that either tax rises or spending cuts will be needed -- or both.
While the national debt has risen past a record 2 trillion pounds, historically low interest rates means the cost of servicing it is low. That gives the chancellor breathing space, although he’ll also have an eye on the next general election due in 2024.
Other budget measures include:
An overhaul of market listings rules to boost the City of London22 billion pounds of capital and loan guarantees to capitalize a new national infrastructure bank5 billion pounds of grants for pandemic-hit businesses. Under Wednesday’s plans, furloughed workers will now receive 80% of their wages through to the end of September -- a five-month extension. Eligibility for grants for self-employed workers was expanded to include another 600,000 people.