Britain’s finance minister Rishi Sunak will promise on Wednesday to do “whatever it takes”, including a five-month extension of a huge jobs rescue plan, to steer the economy through what he hopes will be the final months of COVID restrictions.Sunak has already racked up Britain’s highest borrowing since World War Two and he will turn to the bond markets again in his budget speech, saying the task of fixing the public finances will only begin once a recovery is in sight.
“We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people,” Sunak will say, according to excerpts of his speech which is due to begin around 1230 GMT.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” he will tell parliament.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that. And, third, in today’s budget we begin the work of building our future economy.”
Britain has suffered the biggest COVID-19 death toll in Europe and the heaviest economic shock among big rich countries, according to headline measures of official data. It shrank by 10% last year, its worst slump in three centuries.
Sunak has so far spent almost 300 billion pounds ($419 billion) on emergency support measures and tax cuts.
Many companies are also under strain from Brexit after Britain left the European Union’s single market on Jan. 1 and the government faces the challenge of huge investment to meet its promise to create a net zero carbon economy by 2050.
The detection of a Brazilian variant of the coronavirus has served as a reminder that Britain’s bounce-back from the pandemic cannot be taken for granted even as it races ahead with Europe’s fastest COVID-19 vaccination programme.
Sunak’s immediate priority will be to prop up the economy as Prime Minister Boris Johnson gradually lifts lockdown measures, starting with next week’s reopening of schools in England. Most restrictions are due to be removed by late June.
Sunak will announce he is extending his centrepiece furlough programme, which now covers about one in five private-sector employees, until the end of September and expand support for the self-employed.
Employers will have to start contributing to the cost as the economy reopens, paying 10% of the hours their staff do not work in July, rising to 20% in August and September.
The scheme had been due to expire after 13 months at the end of April, when it will have cost an estimated 70 billion pounds, raising fears of a sharp jump in unemployment.
Over the weekend, Sunak said he would spend another 5 billion pounds on grants for hard-hit businesses.
Former IMF chief economist Ken Rogoff, who once warned of the risks of rising government debt, told BBC radio that he had told Sunak he should keep the spending going.
“I said that we are in the middle of a war,” Rogoff said. “You should not be worrying excessively about the budget deficits and about debt. You can worry about that on the other side. You are looking at catastrophe relief.”
The BBC said Sunak would extend an emergency increase in welfare payments that had been due to expire in April.
Sunak has said he will be “honest” about the cost of the unprecedented support and has pointed to borrowing costs rising from record lows recently, sparked by the prospects of a global economic recovery and U.S. President Joe Biden’s nearly $2 trillion stimulus plan.
A Reuters poll of dealers showed Britain was expected to sell nearly 250 billion pounds ($347 billion) of government bonds in the 2021/22 financial year, the second-highest total on record.
Britain’s budget watchdog was also expected to forecast borrowing of 180 billion pounds for the coming year, down from the 394 billion pounds it predicted for 2020/21.
Sunak is expected to announce an increase in Britain’s low corporation tax rate as a first signal of his plans to address the hole in the budget in the future.
The Sunday Times said he might freeze thresholds at which people start to pay income tax and the higher rate of income tax as a way to raise more revenue without breaking a 2019 election promise not to raise the rates themselves.