Budget 2020: Five ways Rishi Sunak could tackle coronavirus
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Image copyright Getty ImagesA little over three weeks after becoming chancellor, Rishi Sunak is about to deliver what’s become known as the “coronavirus Budget,” as fears grow over the impact the outbreak will have on the UK economy.
He is expected to unveil a package of measures to boost everything from the NHS to struggling small businesses and the self-employed.
But how much can the chancellor actually do, and will it go far enough?
1. Emergency money for the NHS
Mr Sunak has pledged that the NHS will get “whatever resources it needs” to cope with the coronavirus outbreak, suggesting he may be writing the health service a blank cheque.
NHS costs are likely to soar with the extra pressure on its services. It has already had to recruit extra staff for its 111 phone service.
“Clearly a large pool of money will be required for the NHS, bigger than the £400m for the winter flu crisis, so it will be a scaling up,” says Luke Bartholomew, economist at Aberdeen Standard Investments.
“I imagine [the money] would be allocated specifically for issues related to coronavirus, such as public health campaigns, just as much as it would be for hospital beds.”
2. A cut in VAT
The chancellor could cut VAT rates in a bid to get us all to start spending more at the tills.
VAT is a tax added to some goods and services, and currently stands at 20% for most items it applies to. But a cut in the tax “would have limited effect” if shoppers are determined to avoid the High Street, says Ruth Gregory, senior UK economist at Capital Economics.
It would also be expensive: reducing it to 17.5%, for example, would cost HM Treasury about £17bn this financial year, she estimates.
Luke Bartholomew agrees: “I suspect once the worst of the crisis is over, a cut would help the economy bounce back, but it doesn’t matter how much cheaper you make things if people can’t leave the house.”
3. Waive or reduce business rates
Another option for the chancellor is to either delay or temporarily scrap business rates, a tax on firms linked to the value of their premises.
“Cashflow issues are important and business rate suspensions mean businesses could focus on paying employees,” said Melissa Geiger of KPMG.
“It’s easier for governments to help businesses by offering tax relief, rather than paying out lump sums,” she says.
Trade body UK Hospitality has written to the government asking for a three-month business rate suspension for the industry, which has been particularly badly hit by the outbreak.
Hotel occupancy is down 15%, while eating and drinking out has fallen by 7% it says. Advance bookings have slumped by up to 50%.
Using an existing mechanism – like business rates – to support business would be quick and effective, argues Ms Geiger. In an “emergency Budget” like this, “you have to focus on the short-term” she says.
“It’s about paying more through a system you already have, rather than implementing new tax law quickly, which is very difficult.”
4. Support for gig economy workers
UK employees have already started to get statutory sick pay from the first day off work, to help contain coronavirus.
But that money is not available to the self-employed, a group of about five million people. This has led to fears that these workers may struggle to make ends meet, and that those on zero-hours contracts may risk going into work when they shouldn’t, helping the virus to spread.
The chancellor has suggested he may announce temporary measures to support people in this position.
This could include making sure benefits like universal credit and Employment and Support Allowance are available “quickly and effectively”.
It may also mean waiving requirements for sick notes or in-person benefits interviews.
5. A ‘hardship fund’ for small businesses
Cashflow is likely to be an issue for small businesses during this outbreak, as they are particularly vulnerable to sudden loss of trade, supply chain problems and a reduction in their workforce.
Supporting small businesses during this time means “introducing new, targeted measures and delivering on existing promises,” according to the Federation of Small Businesses.
It’s calling for Mr Sunak to relax the requirements to apply for a “Time to Pay” arrangement, which allows small businesses to spread out tax payments to HMRC.
The body wants the UK to follow Japan’s lead by making interest-free loans available to small firms.
It’s also calling for smaller employers to immediately receive a rebate for any statutory sick pay they give out.
Source : BBC Business News | NewsColony: Business
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