Coronavirus: Budget set to deliver billions for Covid-19 response as stock markets tumble

Chancellor Rishi Sunak coming under intense pressure to use his first fiscal statement to protect businesses and workers from impact of disease

Chancellor Rishi Sunak is today expected to unveil billions of spending in response to the coronavirus crisis, as industry and unions put him under intense pressure to protect businesses and workers from the economic storm unleashed by the disease.

With stock markets tumbling around the world and companies facing the prospect of reduced trade, restrictions on travel and large gatherings and staff being forced to stay off work for extended periods, Covid-19 looks set to overshadow a Budget which Boris Johnson had hoped to use as a launchpad for a decade of public sector investment.

It is understood that Mr Sunak will press ahead with promises of “hundreds of billions” of infrastructure investment over the coming period, bringing public spending on roads, railways, housing, communications and research up to levels not seen in real terms since the 1950s.

But industry bodies’ more urgent appeal was for action to get their members through the immediate challenge of a health crisis which is expected to test the viability of many.

The Federation of Small Businesses called for a statutory sick pay (SSP) rebate for smaller employers and wider access to a government deferred tax payment scheme, as well as a hardship fund for the self-employed who lose contracts or are forced to self-isolate.

And the group said the option of a temporary cut to VAT should be on the table in case consumer demand falls away as more people are forced to stay at home.

The CBI is calling for SSP to be extended to cover all workers – including agency staff and those on zero-hours contracts, as well as the lower-paid on less than £118 a week who currently get nothing.

And the TUC wants an increase in the £94.25-a-week payment, warning that almost half of workers would not be able to cover basic living expenses if forced to rely on SSP during a two-week coronavirus quarantine period.

Treasury sources made clear that the budget will include measures to respond to coronavirus, but were remaining tight-lipped on the details of what Mr Sunak will announce.

One senior industry source said the most important contribution he could make would be to settle nervy markets by making clear that the government has a plan for dealing with the economic impact of the outbreak, as well as its health implications.

Mr Sunak should use the budget statement to restore confidence by setting out how the government will make economic policy responsive to the fast-changing challenge of Covid-19 in consultation with the business community over the coming weeks, said the figure, speaking on condition of anonymity.

On Wednesday, Boris Johnson announced that emergency legislation would ensure workers forced to stay home would get sick pay from day one – rather than having to wait four days as now – telling the House of Commons: “Nobody should be penalised for doing the right thing."

But it was unclear whether employers would be helped with the payments, and Mr Johnson suggested that workers who are not entitled to SSP could be forced to claim support from universal credit, raising fears that some may continue turning up for work even if they are infectious.

Meanwhile, Mr Sunak steered clear of suggestions that the Treasury might step in to bail out companies rendered unviable by the epidemic.

Speaking on Sunday, the chancellor said: “‘Bailout’ isn’t necessarily the right word, but there are policy levers we can take to ease the short-term burden on businesses’ cashflow and these are businesses that we think are viable, sustainable, that have a bright future but have a temporary period of disruption – that’s where our interventions should be focused.”

FSB national chairman Mike Cherry said Wednesday’s Budget would be “the chancellor’s first big test, and an opportunity to show he is unequivocally on the side of the small business community at an uncertain time”.

Mr Cherry said: “Supporting small firms that are being impacted by the spread of coronavirus means both introducing new, targeted measures and delivering on existing promises. The horse has already bolted in many countries, so it’s critical that the chancellor takes action now to mitigate any future escalation of the situation here in the UK.”

He cited the HM Revenue and Customs Time to Pay scheme, which gives companies 6-12 months or more to pay taxes, but is currently accessible only by those in severe financial distress.

Access to the scheme should be widened during the coronavirus outbreak, and the chancellor should ensure the banks take a lenient approach on repayments, overdrafts and loans owed by businesses in distress because of the disease, he said.

The UK should follow Japan’s example by making interest-free loans available to small firms struggling with cashflow problems, said the FSB.

A recent report by the FSB showed that more than a third (34 per cent) of small employers have faced costs greater than £1,000 due to sickness absence in the last 12 months, giving examples of firms almost driven to the wall due to their inability to reclaim SSP.

The CBI has backed Mr Johnson’s move to make statutory sick pay available from day one, but is calling for it to be extended to all workers who self-isolate themselves in accordance with public health guidance, even if they don’t have a doctor’s sick note.

The leading industry body also called for emergency relief for businesses faced with an “unsustainable” bill for sick pay, warning that prompt reimbursement will be key to their ability to keep supporting staff.

CBI deputy director-general Josh Hardie has previously warned: “While businesses can help shield workers from the financial cost of coronavirus, there may be situations in the future where some come under extreme pressure and will need support from the government, especially smaller firms.

“If a situation develops where a large proportion of people are unable to work at the same time, repeatedly, or for a sustained period, that is a heavy burden to take on. If costs become too great, the government can look at options for emergency relief measures for businesses and to support jobs.

“We are all in this together. Businesses, government and public health authorities will need to work closely over the coming weeks to best protect and inform people.”

Shadow chancellor John McDonnell said: “With all attention focused on dealing with the coronavirus, we will work constructively with the government to ensure this outbreak is properly managed and defeated.

“What is becoming clear, regrettably, is that the economy and our public services are in a vulnerable position to deal with a shock like this, because of the cuts, weak growth, and widespread insecure work produced by the last 10 years.

“We need urgent investment to deal with the three crises on our hands – coronavirus, the climate emergency, and the crisis in our public services – and our concern is that the public will naturally be disappointed as the budget fails to address these issues effectively.”