Levelling up or staying afloat? The Quarantined Budget

This year’s budget could not have fallen at a more pivotal moment. The newly appointed chancellor, Rishi Sunak, was already under pressure to provide a budget which delivered on all fronts – from funding the NHS to supporting major rail projects. The cabinet reshuffle saw many unsure as to whether Sunak would be ready by March 11. And now, with the imminent threat posed by coronavirus – both to health and, subsequently, the economy – this budget was greeted with scepticism. How could Sunak possibly throw commitment at projects such as HS2 while the NHS, already under pressure, prepares for COVID-19?

We take a look at how Rishi Sunak has negotiated his multiple commitments to the transport and infrastructure sector during a national health crisis, using the confidence of an 80 seat majority to prohibit too much anxiety about the Conservative Party’s cherished reputation for prudent financial management.

Crisis calls

“I will always act responsibly with the nation’s finances,” gushed Sunak, as he maintained that a Conservative budget is like a Conservative government – “it gets things done”, a phrase he was evidently so pleased with, he used it at least 24 times.  But what are these “things” – and what does he hope they achieve?

The top one – unsurprisingly – is to quell economic turbulence amid the threat of Covid-19. “Whatever extra resources our NHS needs, it will get”, said Sunak – whether this is millions or billions, the new chancellor appeared to imply that the sky was the limit if needs be. Perhaps reassuring for the public, but health experts may raise an eyebrow after repeated calls for extra resources, in particular, staff, have not been answered.

Specifically, the budget addresses the anxieties surrounding sick pay for small businesses. Business rates for shops, cinemas, restaurants and music venues in England below £51,000 are being suspended for a year, and a “temporary coronavirus business interruption loan scheme” from banks will offers loans for up to £1.2m for SMEs. The government has also committed to paying for statutory sick pay due to coronavirus, for up to 14 days, for businesses with fewer than 250 employees.

Sunak also rushed to reassure employees that statutory sick pay will be available for “all those who are advised to self-isolate” – even if they do not have any displayed symptoms. And those on in-work benefits who get ill can claim from day one, not day eight. These are steps which have been welcomed, particularly as Public Health England announces an increase in both the numbers of tests being carried out and the numbers of people testing positive for the virus.

These emergency allocations of spending have been positively received by many – including opposition leader Jeremy Corbyn – but concerns still remain. As Professor John Appleby, chief economist at the Nuffield Trust, responded “staff and space are the resources that will really be needed, and the NHS starts in a deep hole after a decade of underfunding and understaffing.” Appleby’s warning that “inaction has consequences” is apt here and suggests that Sunak needs to ensure his earlier words are brought to life.

Appleby, and Niall Dickson, chief executive of the NHS Confederation, also agree on the ‘elephant in the room’ – social care. As Dickson remarks, “Our remaining big concern today is the worry that the government is kicking the can down the road for social care. We fervently hope the cross-party talks announced last week will bring results and we repeat our plea that the Government must be prepared to deal with the crisis that is here and now, as well as tackling long-term reform.”

Transport and Infrastructure

While transport and infrastructure saw less attention than originally anticipated, this was to be expected in the current corona-climate. The chancellor was however keen again to prove that the Tories get the things they promised, done – so he referenced ongoing support for the Manchester to Leeds high speed rail link, and pledged £20 million for development of the Midlands Rail Hub.

Proudly referring to the PM’s manifesto, the chancellor declared that, overall, more than £600 billion is set to be spent on roads, rail, broadband and housing by the middle of 2025, allowing for a better connected Britain. Sunak followed this up with the promise of a £1 billion investment in green transport solutions, and a £1bn fund to remove unsafe combustible cladding from all public and private housing higher than 18 metres. And the House cheered when Sunak announced £2.5bn to fix potholes. £27 billion has also been allotted for the development of the UK’s roads.

The promise of green transport funding, while very much welcomed, has, however, been met with queries over the chasm between this and the decision to freeze fuel duty for another year. As Darren Shirley, chief executive of Campaign for Better Transport comments, this has “made car journeys progressively cheaper, whilst rail and bus fares have continued to rise.” This decision may be popular for regular road users, but has certainly ruffled feathers among climate activists and those in public transport sectors.

A new train station at Cambridge South, as part of the Oxford to Cambridge transport corridor also featured, and the chancellor was also keen to prove he was not neglecting the North. A £4.2 billion fund for seven ‘metro mayors’ of England’s devolved city regions will help to develop transport links, and there will also be an additional £1bn for improved transport in cities such as Stoke.

So, was Johnson correct to claim that there is “about to be an infrastructure revolution in this country”? Well Darren Caplan, chief executive of the Railway Industry Association, claims that the rail industry is “excited” by “this ambitious programme of investment.” However, Caplan points out much of this investment does not come into force until the mid 2020s, “meaning a shortfall in the next five years.”

Final thoughts

Sunak only had just over three weeks to write this budget, but much of it will have been rewritten in the last few days and hours as it too became infected by coronavirus. Fortunately for him, Dominic Cummings appears to have drafted much of it already, as Number 10’s determination to abandon austerity and massively increase public spending on major projects is clear throughout. And, for the most part, it succeeded in keeping campaign promises and addressing major anxieties. But nothing for social care and no indication on how it will be paid for in the long term.

It will be paid with through a huge rise in borrowing, but as Sunak said himself only five years ago in his contribution to the 2015 budget debate, “For too long, Governments have got that back to front, spending first, ignoring how much is coming in, then letting borrowing endlessly make up the difference… rather, tackling excessive public spending is simply the sensible, logical and responsible course of action. That action, taken to make sure that we live within our means, is the same course of action that any business or household would take when presented with the facts. We all know what happens when those facts are ignored: more borrowing, more debt.”

An anxious population, worried business and strained public sector workforce will find much in yesterday’s budget that is reassuring and supportive.  They will probably delay asking how it will be paid for while focussing on the health of their families and friends.  Only time will tell if this most unconservative of Budgets can truly “level up the country”, when a virus is so determined to bring it down.