Wednesday July 17, 2024

Britain to unveil post-coronavirus plan to boost economy

Prime Minister Boris Johnson has vowed to launch an "infrastructure revolution" for schools, affordable housing, road maintenance and public transport

July 08, 2020

LONDON: Britain will Wednesday unveil a mini-budget to kickstart the UK economy, hoping costly infrastructure investment will help build its way out of the crisis caused by the coronavirus outbreak.

Prime Minister Boris Johnson has vowed to "build, build, build" in an "infrastructure revolution" for schools, affordable housing, road maintenance and public transport.

Finance minister Rishi Sunak is due to deliver his spending plans at 1130 GMT, having already flagged £3 billion ($3.7 billion, 3.3 billion euros) of green investment.

The chancellor of the exchequer will offer £2 billion ($2.5 billion, 2.2 billion euros) in grants for households to insulate homes and make them more energy efficient.

A further £1 billion ($1.25 billion, 1 billion euros) is being provided for public sector buildings, including hospitals.

Britain has had more than 44,000 deaths in the outbreak -- the highest in Europe -- heaping pressure on the government for its handling of the crisis.

Sunak said on Tuesday: "As Britain recovers from the outbreak, it's vital we do everything in our power to support and protect livelihoods across the nation.

"Our green homes grant will not only cut families' bills by making their homes more energy efficient, it will also kickstart our economy by creating thousands of green jobs -- and supporting those skilled tradespeople who are ready to work."

The plan is part also of Britain's long-term pledge to reduce carbon emissions to net zero by 2050 to tackle climate change.

In addition, Sunak may announce plans to reduce stamp duty, which is levied on real estate transactions, to boost the property market.

Yet he is not expected to alter Britain's emergency jobs retention plan, or furloughing, under which the government pays up to 80 percent of salaries for private sector workers.

Furloughing, which ends in October, is part of a series of multi-billion-pound packages to help those affected by the impact of the outbreak in Britain.

"Four months on from the outset of coronavirus, we have slowly and carefully reopened much of our economy, and we can now begin our national recovery," Sunak told parliament.

"Throughout this crisis I have repeatedly made clear that whilst we cannot protect every single job, we will do all we can to make sure our businesses and people have the tools they need to get through this and emerge stronger on the other side."

- Financial 'hole' -

Britain imposed a nationwide lockdown on March 23 to halt the spread of COVID-19 but has gradually begun easing restrictions in the hope of boosting ailing businesses.

Recent official data showed that the UK's biggest quarterly contraction for more than 40 years -- at minus 2.2 percent -- in the January-March period.

However, the data included only the first full week of the lockdown and economists expect subsequent damage to be considerably worse for the second quarter.

Another contraction would place Britain in a technical recession.

The Bank of England has pumped cash stimulus worth £300 billion to prop up Britain's virus-hit economy since the crisis erupted.

Experts estimate the total cost of state emergency measures meanwhile could run as high as £300 billion.

"As the UK begins to emerge slowly from lockdown, focus now turns to plugging the eye-popping £300 billion hole left in the UK's finances by COVID-19," said analyst Tom Selby at stockbroker AJ Bell.

"The chancellor will have to weigh up his desire to kickstart the economy after its slumber with the need to raise extra revenue via the tax system.

"A strong recovery should boost tax receipts and lower the amount spent on benefits, automatically improving the government's balance sheet.

"The chancellor may decide to frontload the 'good news' items on Wednesday as he attempts to kickstart the economy -- and save the tax nasties for his Autumn budget."