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Economic Update

Part of the debate – in the House of Commons at 7:06 pm on 17th March 2020.

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Photo of Rishi Sunak Rishi Sunak The Chancellor of the Exchequer 7:06 pm, 17th March 2020

Thank you, Mr Speaker. I am grateful to you for allowing me to make this statement. Let me wholeheartedly apologise that I was not able to set out these measures to the House first. I can provide the reassurance that you requested and I hope that hon. and right hon. Members across the House understand that these are extraordinary circumstances.

I want to take the opportunity today to set out for the House the next stage of our economic plan in response to the coronavirus. The coronavirus pandemic is a public health emergency, but it is also an economic emergency. We have never, in peacetime, faced a fight of an economic nature like this. I know that people are deeply worried. I know that people’s anxiety about the disease itself is matched only by their anxiety about their livelihoods.

In the Budget last week, I set out the first stage of our economic response with a £30 billion package to support people and businesses. I promised to do whatever it takes to support our economy through this crisis and that, if the situation changed, I would not hesitate to take further action. As the Prime Minister set out yesterday, we are now approaching the fast-growth part of the upwards curve. He has set out the next stage of our public health response; I want to update the House on the next stage of our economic response.

Let me begin by setting out for the House our overarching economic strategy. People should know that the objective of our economic policy remains clear and our resolve remains firm: we will do whatever it takes to protect households and businesses to get through this, and to make sure that the effects do not become permanent. As we develop our strategy, not just today but over the coming days and weeks, we will be guided by three principles. First, our response must be comprehensive. This national effort will be underpinned by Government interventions in the economy on a scale unimaginable only a few weeks ago. This is not a time for ideology and orthodoxy. This is a time to be bold—a time for courage.

I want to reassure every British citizen that this Government will give you the tools you need to get through this. We will support jobs, we will support incomes, we will support businesses, and we will help protect your loved ones. We will do whatever it takes.

Secondly, our response must be co-ordinated. We in Government are working hand in glove with the wider economic authorities. Domestically, that includes the Bank of England, the regulators, and the health response. And internationally, I continue to engage with my G7 and G20 counterparts to agree and facilitate a global response.

Thirdly, our response must be coherent. It would be easy, at a time like this, to rush into a response and measures that we found out later had been ill-considered. The single most important test we in this House must set ourselves is to make sure that the actions we take will, in the lives of ordinary people and businesses, make a difference. To apply those principles in practice, we will use fiscal action to support public services, households and businesses. The Budget last week set out the first stage, including our commitment to provide the NHS with whatever it needs. In the coming days, I will take further steps, with a particular focus on supporting people and individuals.

In response to the updated medical advice yesterday, I can take three immediate steps today. First, the Government will stand behind businesses small and large. I can announce today an unprecedented package of Government-backed and guaranteed loans to support businesses to get through this. Today, I am making available an initial £330 billion of guarantees, equivalent to 15% of our GDP. That means any business that needs to access cash to pay its rent, salaries or suppliers will be able to access a Government-backed loan on attractive terms. If demand is greater than the initial £330 billion I am making available today, I will go further and provide as much capacity as required. I said whatever it takes, and I mean it.

That support will be delivered through two main schemes. To support liquidity among larger firms, I have today agreed a new lending facility with the Governor of the Bank of England to provide low-cost commercial paper. To support lending to small and medium-sized businesses, I am extending the new business interruption loan scheme I announced at the Budget last week so that rather than loans of up to £1.2 million, it will now provide loans of up to £5 million, with no interest due for the first six months. Both of those schemes will be up and running by the start of next week. I am also taking a new legal power in the covid Bill to offer whatever further financial support I decide is necessary.

Some sectors are facing particularly acute challenges. In the coming days, my right hon. Friend the Secretary of State for Transport and I will discuss a specific potential support package for airlines and airports. Yesterday, I asked my Cabinet colleagues to urgently convene meetings over the coming days with business leaders and representatives in the most affected sectors to identify other specific opportunities to support them, including possible regulatory forbearance. I repeat: we will do whatever it takes.

Secondly, as well as access to finance, businesses need support with their cash flow and fixed costs. Following the changed medical advice yesterday, there are genuine concerns about the impact on pubs, clubs, theatres and other hospitality, leisure and retail venues. Let me confirm today that for those businesses that do have a policy that covers pandemics, the Government’s action is sufficient and will allow them to make an insurance claim against their policy. But many businesses do not have insurance, so we need to go further. I announced last week that businesses in the retail, hospitality and leisure sectors with a rateable value of less than £51,000 will pay no business rates this year. Today, I can go further and provide those businesses with an additional cash grant of up to £25,000 per business to help bridge through this period.

Additionally, I am extending this business rates holiday to all businesses in those sectors, irrespective of their rateable value. That means that every single shop, pub, theatre, music venue and restaurant, and any other business in the retail, hospitality or leisure sector, will pay no business rates whatsoever for 12 months, and if they have a rateable value of less than £51,000, they will now get a cash grant as well. I also announced last week that we would be providing £3,000 grants to 700,000 of our smallest businesses. To support their cash flow in these exceptional circumstances, today I can increase those cash grants to £10,000.

Taken together, on top of the unlimited lending capacity I have already announced, that is a package of tax cuts and grants in this financial year to directly support businesses worth more than £20 billion. That comes on top of the existing multibillion-pound package I set out at Budget, which included reimbursing small and medium-sized companies for the cost of statutory sick pay. Local authorities in England will be fully compensated for the costs of these measures, and the devolved Administrations will receive at least £3.5 billion in additional funding as a result, to provide support to businesses in Scotland, Wales and Northern Ireland. I repeat again: we will do whatever it takes.

Thirdly, I will strengthen our support for peoples and individuals. At Budget last week, I committed £1 billion to support the financial security of vulnerable people through a half-a-billion-pound boost to the welfare system and a half-a-billion-pound hardship fund for local authorities. Following discussions with industry, I can announce today that, for those in difficulty due to coronavirus, mortgage lenders will now offer a three-month mortgage holiday, so that people will not have to pay a penny towards their mortgage while they get back on their feet. In the coming days, I will go much further to support people’s financial security. In particular, I will work with trade unions and businesses to urgently develop new forms of employment support to help protect people’s jobs and incomes through this period.

Let no one doubt our resolve. When I said in the Budget last week that we will do everything we can to keep this country and our people healthy and financially secure, I meant it. The measures that I have announced today are part of a comprehensive, co-ordinated and coherent response to a serious and evolving economic situation. These are only the first steps, and I will set out the next stage of our response in the coming days. We have never faced an economic fight like this one, but we are well prepared. We will get through this, and we will do whatever it takes. I commend this statement to the House.