Britain unveils its first post-Brexit budget on Wednesday and analysts expect Prime Minister Boris Johnson to press ahead with major spending on infrastructure, despite the economic fallout from the coronavirus.
Finance minister Rishi Sunak, who will present the budget after his predecessor Sajid Javid resigned unexpectedly last month, is also scheduled to outline emergency funding measures in the battle against COVID-19.
Before the novel coronavirus hit the headlines, Chancellor of the Exchequer Sunak had said the budget “will deliver” on recent government promises of “unleashing the country’s potential”.
However, the government has now delayed publication of its National Infrastructure Strategy — a more long-term outlook on improving British transport connections while achieving net-zero emissions nationwide by 2050.
In the immediate term, 39-year-old Sunak’s task is to carry out Johnson’s goal of boosting improved productivity in cities outside London via massive infrastructure projects, such as the new high-speed railway HS2.
Javid resigned, and was replaced by his deputy Sunak, after Johnson offered to keep on the former chancellor only if he sacked all of his political advisers.
The prime minister wants greater say over Treasury policy following the Conservatives’ victory in the general election in December that finally unlocked Brexit and allowed Britain to quit the European Union on January 31.
“Sunak won’t sit on his hands in the budget, in the face of the meltdown in financial markets and growing concerns that the coronavirus is developing into a pandemic,” said Ruth Gregory, economist at Capital Economics research group.
“The chancellor’s first priority will be to unveil a package of targeted measures to help offset any damage inflicted by the virus.”
– Delivering on promises –
The second “will be to deliver the government’s 2019 manifesto promises and set the wheels in motion on raising investment spending,” Gregory said.
The government has said full construction work on the long-delayed HS2 would begin next month after Johnson backed the project despite soaring costs and damage to wildlife.
Analysts also expect the new budget to provide greater detail on the government’s fiscal plans.
“There’s the implication that there will be a lot of increased investment spending,” said Paul Johnson, director of the Institute for Fiscal Studies.
“But for all the chanting about the number of additional police officers and hospitals and so on… there’s very little in there, in terms of actual promises for changes to day-to-day spending or indeed promises for tax changes.”
The government is promising 20,000 extra police officers and greater investment in the country’s state-run hospitals — but details on National Health Service spending, in particular, have been sketchy.
Britain’s departure from the European Union has cost taxpayers more than £4 billion ($5.2 billion, 4.6 billion euros) in extra government costs, the National Audit Office said on Friday.
– Viral fallout –
The coronavirus is also expected to cloud the outlook for the British economy.
On the eve of Brexit, the Bank of England cut its growth forecasts for this year and next, as the country faces tough negotiations with the EU on a new trade deal.
Recent official data showed that growth slowed to zero in the final quarter of last year as manufacturing shrank.
The Bank of England is predicted to follow the lead of the US Federal Reserve and cut its own interest rates to support the British economy as the coronavirus hurts global growth.
Last week, the BoE’s incoming chief Andrew Bailey said UK-based companies would need help in the face of disruptions to supplies triggered by the disease.
Bailey, who takes over from governor Mark Carney on March 16, singled out small and medium-sized firms for such aid, likely under a joint effort with British retail banks and the government.