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Chancellor treats business with £30bn virus plan

Rather than let the coronavirus usurp his Budget today, Chancellor Rishi Sunak opened his dispatch box debut by tackling the issue head on with a £30bn support package for business and the wider economy.

12th Mar 2020
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Coronavirus

With the government going more than 15 months without a Budget, the Chancellor had a choice of financial policy and tax proposals to pack into his maiden speech, but the coronavirus pandemic scuppered many of those plans and forced him to do some last-minute redrafts.  

Confronting the issue from the get-go, Sunak pledged a £30bn package of temporary measures to support public services and businesses through economic disruption caused by COVID-19.

“There will also be an impact on the demand side of the economy, through a reduction in consumer spending. The combination of those effects will have a significant impact on the UK economy,” said Sunak.

“But it will be temporary. People will return to work. Supply chains will return to normal. Life will return to normal. For a period, it’s going to be tough. But I’m confident that our economic performance will recover.”

Statutory sick pay

To deliver on this reassuring pledge, the Chancellor set out the government’s fiscal action to manage the coronavirus outbreak.

To deal with workers falling ill or staying at home to limit the spread of bug, the Chancellor announced that statutory sick pay (SSP) will be available for all those who are advised to self-isolate – including those who haven’t yet shown symptoms.

The Chancellor’s announcement follows the Prime Minister’s promise that SSP will be paid from day one, rather than day four.

in a move that could bolster two billion businesses with an extra £2bn, Sunak also said businesses with fewer than 250 employees will be refunded the cost of SSP for employees off due to the coronavirus. The government will work with employers over the coming months to set up the repayment mechanism.

Other measures

It’s not just SSP where businesses will need assistance. The government coronavirus support package includes a 12-month business rates holiday, which has been extended from retail businesses to the leisure and hospitality sectors.  

In addition, the government pledged an additional £2.2bn funding for local authorities to support small businesses that already pay little or no business rates. This measure will provide a one-off grant of £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief.

Aside from business rates, Sunak asked HMRC to scale up its time to pay facility to help businesses and self-employed people in financial distress defer tax payments over an agreed period of time.

“Although time to pay is important, it will still be the case that some good, well-run businesses will face problems with their cash flow,” he continued as an introduction to a coronavirus business interruption loan scheme. 

The scheme will support loans for small and medium sized business of up to £1.2m in value, and guarantees of up to 80% of losses will be put on those loans.

Sunak explained that this “generous guarantee” will ensure that banks can lend with confidence. Looking at the small print, this new guarantee will initially support up to £1bn of lending on top of current support offered through the British Business Bank. Earlier in the day, the Bank of England joined in the rescue mission with an interest rate cut and provisions to let high street banks lend more of their capital reserves.

AAT responds

The coronavirus response made the fiscal event a “Budget of two halves”, according to AAT spokesman Brian Palmer.  

“On the one hand, we have the government’s emergency response to the ongoing coronavirus epidemic, which includes measures to shore up UK businesses in the event of a recession, such as extending time to pay and guaranteeing loans to small businesses.

“However, the promised infrastructure revolution is also radically expanding with a new wave of investment, particularly outside of London and measures to make the economy greener and fairer.

“The Chancellor has a delicate balancing act to maintain, and we will continue to see how the ongoing situation impacts the government’s decision to focus on economic security whilst developing a skilled, productive UK economy over the coming months.”

 

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Replies (4)

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Jonathan@Aiteo
By [email protected]
12th Mar 2020 12:18

Has anyone seen anything published on how to access the £3,000 SBRR rebate?

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By djtax
12th Mar 2020 12:23

The detailed Budget notes say the cash will be distributed by HMG to local authorities for them to distribute as they see fit (or words to that effect). No guidance how it can be claimed or whether a claim is required at all. Typical 'Westminster bubble' speak that does not translate readily into real world practicality. I suspect that this 'emergency' aid to small businesses will not reach some until it is too late...

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Jonathan@Aiteo
By [email protected]
12th Mar 2020 12:43

Thanks. I will rattle the cage of my local Rates authority then!

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By ireallyshouldknowthisbut
12th Mar 2020 14:27

This £30BN isnt even close to adding up.

Are these real Billions (ie 1000 million) or a 'Westminster billion' ie 100 Million?

£2BN on SSP. SSP is £95 a week, so that's what 2,000,000,000 over 95 = 21 million weeks off work & claimed. Really!?!?!? Remember this is only small and medium employers. Given there is not even a system for making these reclaims I cant see quite how they will be paid out any time soon.

The loan guarantee is not spending its just "supporting" loans (which will probably never be made) upto a gross value of £1 billion

The business rate relief looks suspect too. Are there really 700,000 businesses claiming SBRR?

We are supposed to be accountants and should questions dodgy spin stats.

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