“Given the growing scale of the impact of coronavirus on the global economy – and also its likely impact on the UK – a strong statement of intent from the Chancellor is absolutely the right thing to do.
“The scale of the response was impressive. If the past few weeks has been about turning on the taps to wash our hands, here was the Chancellor turning on the UK’s fiscal taps to try and avoid the worst. It also shows welcome co-ordination with the Bank of England to help provide support direct to businesses and indirectly to their workers.
“For business his message was that this support would act as a ‘bridge’ to help cope with one off stresses and make it through to a resumption of normality. When many businesses are feeling worried about how to cope, Rishi Sunak’s proactive firepower will be very welcome.
“This was a big spending budget in the short, medium and long term, and although some of the measures were populist – with freezes on all alcohol duties – most of the money would be on capital expenditure: particularly on infrastructure. Much of this is very sensible. The UK has underspent on infrastructure for far too long – pursing a penny wise, pound foolish strategy. With global borrowing so cheap it makes sense to increase our spending on transport, housing, broadband, skills and research and development – all of which have the potential to boost long term growth.
“This included welcome namechecks for improving the A417 in Gloucestershire and the A303 near Salisbury, and new investment in roads, rail, University research and a ‘New Blue Skies funding agency’ modelled on the American ARPA. There was stress on business innovation and international trade, with new trade envoys announced for the West of England and Wales around the world.
“This, then, was the right response to a possible big economic shock, and also some long term infrastructure challenges.
“However, there remains a daunting global backdrop. No one yet knows how big a shock coronavirus will bring us. Today the ONS had already announced that growth from January to March had stalled to zero. The government’s growth projections had also been shrinking, even before coronavirus had been taken into account. And we still face major changes in our global trading relationships, and with the EU, when the transition period ends on the 31st of December.
“Some will therefore be nervous that this budget could be a hostage to fortune, reliant on continued benign global interest rates, a rapid return to growth, and with a needed clawback through higher taxes in two or three years’ time. A short term boost to help the UK out of a difficult place, we now place our faith that the future will take care of itself.”