The United Kingdom government has just announced a package worth billions of pounds to cushion the economic fallout on its economy and businesses because of the spread of the coronavirus. This announcement was made by the country’s finance minister on Wednesday.
All of the major economies have come under pressure since the outbreak of the coronavirus in China in late December last year. The virus outbreak has upended global supply chains, particularly those heavily reliant on China production and hit the travel and tourism industry very hard, along with panic buying and stockpiling because of rising concerns of the spread of the virus. This has resulted in global growth forecasts being trimmed by s number of economists and organizations such as the OECD.
The UK government will make available £7 billion or $9 billion as support for the labor market in addition to an amount of £5 billion to help the health-care system, Rishi Sunak, who was appointed as the country’s finance chief last month, told the UK Parliament.
A further fiscal stimulus of £18 billion to support the country’s economy was also announced by Sunak. The total government spending in the form of the fiscal stimulus therefore came to £30 billion. This was described as the largest budget giveaway since 1992, by the UK public body, the Office for Budget Responsibility.
Sunak told lawmakers that the “coronavirus will have a significant impact on our economy, but it will be temporary.” The government’s response will be “timely” and “targeted,” he added.
There were 328 confirmed cases of coronavirus and 6 deaths from the infection as of Wednesday in the UK. The UK government has already taken a slow of measures to tackle the virus infection such as making payment of sick pay mandatory for every individual who are advised for self quarantine irrespective of whether they show symptoms of the virus infection or not and taking steps to ensure easy availability of loans for small and medium-sized businesses. Additionally, an emergency cut to interest rates was announced by the Bank of England (BOE) earlier on Wednesday.
The announcement of Wednesday was the first annual budget of the government formed under the leadership of Prime Minister Boris Johnson.
Plans for lowering of taxes on workers, freezing of payable duties on cider, wine and fuel, and introducing a new tax for plastic packaging were also announced in the budget.
“The fiscal stimulus announced by Chancellor Rishi Sunak in today’s budget should help to support economic growth given the economic headwinds created by COVID-19, but the resulting deterioration in the U.K.‘s fiscal position highlights the sovereign’s ongoing difficulty in meaningfully reducing the U.K.’s gross general government debt burden from its current high levels,” said Sarah Carlson, a Moody’s senior vice president.
Measures for boosting of credit flow and the interest rate cut by the Bank of England coupled with the budget announcement, “should go a significant way towards mitigating the economic impact of the virus in the short term,” said John Hawksworth, PwC’s chief economist.
(Adapted from CNBC.com)