Budget

If Jeremy Corbyn had been saving his energy by giving a poor performance at PMQs, he wasn't saving it for his Budget response. He sounded bored, almost as though he too is fed up of waiting for the Labour leadership contest to trundle to an end so that he can pack off and not have to respond to economic statements. Beside him, John McDonnell looked a little envious that the final big fiscal event of the duo's time at the top of the party was the one Corbyn got to respond to, rather than the Shadow Chancellor. He even failed to notice that the debate was being chaired - as it always is - by the deputy speaker Eleanor Laing, and spent much of his speech referring to 'Mr Speaker’.

We are likely to see a significant fiscal and monetary stimulus across the UK, eurozone and US in the coming days — lots more spending (e.g. tomorrow’s UK budget), and probably significant easing by the Bank of England, ECB and Fed (presumably measures to increase the flow of cheap credit to cash-strapped businesses and individuals, rather than pointless discount rate cuts). But all of that could be a temporary markets steroid unless the spread of virus is decelerated. So what really matters are stats on daily increases in infections, and whether what is happening in China and Korea — namely a sharp slowdown in new Covid-19 cases — is artificial suppression or genuine victory. All eyes are therefore on the Italian lockdown and how effective that will be.

Rishi Sunak - We will give the NHS whatever it needs The Chancellor Rishi Sunak was the government's representative across the TV studios today, ahead of his first Budget on Wednesday. Sunak remained tight lipped when asked about many of the specific measures he would be taking, but told Sky’s Sophy Ridge that the NHS could expect more cash to help with the strains caused by the coronavirus: https://twitter.com/RidgeOnSunday/status/1236572324889006081?ref_src=twsrc%5Etfw SR: Are you ready to give more money to the NHS? RS: Absolutely. We stand ready to give the NHS whatever it needs. Flood defence spending will double Sunak also told Ridge that the amount of money the UK spent on flood defences would go up to £5.

When Sajid Javid resigned in a row with No. 10, there was much speculation about what would be in the coming Budget. No one, though, predicted that it would end up being overshadowed by coronavirus. The short-term economic effects of this outbreak are almost unknowable. It is still hard to work out how serious it is going to be. One of those drawing up the government response plan tells me they would be happy if, in a year’s time, people thought they had wildly overreacted. Boris Johnson once said that the mayor in Jaws — who keeps the beaches open despite reports of a shark — was his hero for resisting the clamour for action. But now that he is in Downing Street he has no intention of taking a similar risk.

The coronavirus is putting politics on hold. The Budget, as I say in this week’s magazine, will be a much less dramatic event because of it. Given the level of economic uncertainty the virus is creating, it would be sensible to wait for the autumn Budget — when the situation should be clearer — before making big, fiscal policy decisions. The Budget, as a consequence of this, will largely be about ‘delivering’ on the Tories’ manifesto commitments. In Downing Street they know that trust is a huge issue for both the government and Boris Johnson personally, so they want to show that they are keeping their promises.

UK and Scottish government modelling shows that the economic and fiscal costs of a Covid-19 epidemic could be on a par with the costs of the 2008 banking crisis. According to a senior government source: ‘that is what our modelling shows’. If millions were unable to work and significant numbers of businesses unable to trade – as usual during an epidemic – there would be a huge automatic rise in Universal Credit and other welfare payments to those quarantined. Further costs would be incurred from whatever schemes are put in place to shelter otherwise viable businesses from collapse, coupled with any emergency top ups to health and social care spending.

Could motorists be hit with the first fuel duty rise in ten years in this month’s Budget? According to the Sun, the PM’s chief advisor Dominic Cummings wants to use petrol and diesel as a revenue-raiser to fund big infrastructure projects outside the capital. But ending the fuel duty freeze after a decade might not be a good idea, particularly when many new Tory voters in the North are likely to be the worst affected. Fuel duty is an easy way to raise revenue in theory, as the demand for fuel is always high. It is also a tax that is difficult for motorists to avoid (though this doesn’t stop some from trying).

Tory activists are in uproar this morning over varying reports of tax raising measures Boris Johnson and Sajid Javid are considering for next month’s Budget. Plans currently being mooted include cuts to pension tax relief and the introduction of a recurring property tax that could replace stamp duty. Critics have been quick to say that neither proposal fits with what the Tory party traditionally claims to want to do – rather than new taxes and limits Johnson ought to be pushing for tax cuts. However, the view in both No. 10 and No. 11 is that this is the year for tough – and potentially unpopular – decisions.