Coronavirus: Budget cancelled as Rishi Sunak prepares to unveil more support for business

Chancellor facing demands for extension of furlough scheme

Andrew Woodcock
Political Editor
Wednesday 23 September 2020 20:37 BST
Coronavirus in numbers

Chancellor Rishi Sunak has called off plans for a budget this year, as he revealed he will announce new financial measures on Thursday to respond to the worsening Covid crisis.

News of an imminent statement  heightened expectations that the chancellor will announce some form of replacement for his furlough scheme, currently due to shut down on 31 October despite warnings of a “tsunami” of job losses.

Mr Sunak had been expected to deliver his second budget of 2020 within the next few weeks, and was hoping to use it to set out plans for major investment in infrastructure to turbo-charge the UK’s recovery from lockdown and drive Boris Johnson’s “levelling up” agenda.

But his plans have been blown off course by the rapid upsurge of coronavirus cases which forced the prime minister to impose new restrictions on economic and social activities.

The move – including a 10pm curfew for pubs and restaurants – has put the chancellor under intense pressure from business and unions to provide financial support to companies and workers likely to see incomes depressed for at least the next six months.

Labour is calling for a furlough scheme – which had paid up to 80 per cent of wages of workers who would otherwise be laid off – to be targeted at the sectors worst-hit by coronavirus, such as aviation, retail and hospitality. While the TUC has set out a plan which would see the government paying for the training of workers who cannot go back full-time.

Labour leader Sir Keir Starmer warned the chancellor: “We need a ‘Plan B’ for the economy. It makes no sense to bring in new restrictions at the same time as phasing out support for jobs and businesses.”

“We need a national effort to protect jobs and prevent a second lockdown.”

Even the Bank of England governor Andrew Bailey intervened on Tuesday to warn the chancellor to “rethink” his plans to shut down the scheme.

Mr Sunak had been preparing contingency plans over the summer for a possible upsurge in coronavirus cases, and will set out his proposals in the House of Commons on Thursday, when he is due to answer urgent question from Labour shadow chancellor Anneliese Dodds. 

Treasury sources said that jobs would be at the heart of the package drawn up by the chancellor, but declined to discuss reports that he will unveil a German-style short-time working scheme, allowing the state to top up wages of staff whose employers cannot offer them more than 50 per cent of normal hours.

A Treasury source said: “No-one wanted to be in this situation but we need to respond to it. 

"The chancellor has shown he has been creative in the past and we hope that people will trust us to continue in that vein. Giving people reassurance and businesses the help they need to get through this is uppermost in his mind.”

Treasury sources said that the decision not to go ahead with the budget reflected the “flexible and adaptable” approach taken by Mr Sunak since the start of the crisis.

The move marks the chancellor’s recognition that an attempt to set out long-term spending plans would be regarded as inappropriate at a time when coronavirus cases are doubling every seven days and companies and individuals are having to respond to rapidly changing regulations.

Instead, he aims to focus on the immediate needs of the economy faced with restrictions on normal activities which the prime minister confirmed could stretch through the crucial Christmas period and into next spring.

Sources said he will be up-front in Thursday’s statement on the need for difficult trade-offs, not between health and the economy, but between keeping people in their existing jobs and helping them find new ones and between providing immediate help and rebuilding for the future.

Mr Sunak last week sparked speculation that the budget would be delayed by taking the unusual step of asking the Office of Budget Responsibility to draw up its economic forecasts without at the same time naming a date for the fiscal event at which they are normally published.

The  chancellor’s spending review setting out the government’s overarching expenditure plans for the next four years will go ahead before the end of the calendar year as planned, though no date has been set for it.

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