UK finance minister Rishi Sunak on Wednesday unveiled his budget — a £30 billion stimulus package — and promised to do whatever it takes to support the UK economy amid the harsh financial impact of the coronavirus.
The chancellor’s bold move came a few hours after the Bank of England — the UK’s central bank — announced an emergency interest rate cut from 0.75% to 0.25% and a series of other measures.
The FTSE 100 Index was flat before the budget speech — but closed 1.4% lower, falling alongside European and US indexes.
UK shares had risen more than 2% in early trading after the emergency rate cut.
Sunak announced the budget plan as part of a larger debt-fueled investment surge by the UK government that budget forecasters said represented the biggest stimulus package since 1992.
PwC chief economist John Hawksworth said Sunak was increasing UK spending in the face of the uncertainties about coronavirus, the global economy and the UK’s ability to secure a European Union trade deal.
“Time will tell if this gamble pays off,” said Hawksworth.
The chancellor said he would help ease a cash-flow crunch for UK companies with measures including a year-long suspension of a property tax for smaller firms and would also provide help in providing sick pay.
In the plan, businesses and self-employed people can defer tax payments and sick pay qualification rules have been relaxed.
Public investment will total more than £600 billion over the next five years.
The UK’s Office for Budget Responsibility (OBR) said the UK deficit would hit nearly 3% of GDP in the 2021-22 fiscal year, up from a previous forecast of 1.6%.
The OBR said Sunak’s plans would add £125 billion to the UK’s public debt by the mid-2020s, about 4.6% of GDP.
That would mean the UK’s debt-to-GDP ratio holds steady at around 75% rather than falls as previously planned.
Sunak said: “Taken together, the extraordinary measures I have set out today represent £7 billion to support the self-employed, businesses and vulnerable people.
“To support the NHS and other public services, I am also setting aside a £5 billion emergency response fund – and will go further if necessary.”
He said other plans represented another £18 billion of “additional fiscal loosening” and “that means I am announcing today, in total, a £30 billion fiscal stimulus to support British people, British jobs and British businesses through this moment”.