Boris Johnson’s first budget unveils £30 billion stimuli to fight the coronavirus pandemic

Yesterday was a big day for the United Kingdom. The Boris Johnson government presented its first budget yesterday after the country pulled out from the European Union. Chancellor of the Exchequer, Rishi Sunak, one of the youngest faces in the cabinet, delivered a budget that had a significant component of resources directed towards tackling the current threat of the coronavirus pandemic encountered by the country. The Chancellor, while terming the epidemic as worrisome, announced a stimulus package of £30 billion for the British industry fighting the slowdown in business activities caused by this menace. The Chancellor, in his speech in the House of Commons, also promised all possible help for the National Health Service, which is currently working tirelessly to contain the spread of the virus in the country. Meanwhile, yesterday, WHO Director-General Tedros Adhanom Ghebreyesus declared the coronavirus outbreak a pandemic while also stating that the organization has never before witnessed an epidemic sparked by a coronavirus previously.

Policy action by the British government was very much in the cards since the start of the virus outbreak. The last month has been quite tormentuous for the United Kingdom. The country has so far registered more than 400 cases of coronavirus infections, and at least six have expired from contracting the disease. The related travel ban and restriction on movement of goods have already cost the country billions of pounds in losses. Several companies, who have deep trading relations with China, have already issued revenue and profit warnings. Now with the virus scare spreading its wings closer to home, the danger to the country has become even more pronounced. Neighbouring country Italy has now become the second most infected country in the world by the coronavirus after China. Travellers from the country now are being held responsible for spreading the virus to a higher number of countries than were initially infected by travellers from China. More travel restrictions on people of a higher number of nationalities would mean further loss of business activity for the country leading to more job losses.

Meanwhile, the Bank of England yesterday cut its interest rates by 50 basis points in view of the mounting threat of the pandemic. The central bank cut its rates from 0.75 per cent to 0.25 per cent after its monetary policy committee in an unscheduled meeting voted unanimously in favour of a rate cut to confront this latest threat to the British economy. The bank, however, had been reluctant at first to cut rates, as it felt that the rates were already too low and also because the economic situation in the country had been improving since the beginning of the new year. However, towards the last week of February 2020, the situation had changed altogether. The coronavirus epidemic had taken grip of the entire world economy, and with it, a significant part of the United Kingdom’s international trade had been affected. Meanwhile, British Junior minister of health, Nadine Dorries, also tested positive for the virus on the 11^th March 2020 while she had been attending the current parliamentary session for the past one week and met with hundreds of members there. Should it be found out that other members of Parliament and government servants have also been infected, the situation could very well become unprecedented in the country’s history. Luckily yesterday’s budget presentation in the House of Commons went off peacefully without anyone else reporting sick.

In yet another move having hardly any precedence, major banking groups in the United Kingdom also joined in forces with the rest of the country to fight the pandemic. Royal Bank of Scotland, Lloyds Banking Group and TSB Bank have announced that they will be offering mortgage payment holidays to their customers to help them see through the business disruptions caused by the coronavirus pandemic. The move, however, is a well thought out one; while it puts undue pressure on the margins of the banks, on the one hand, it will also help them prevent many of their loans from turning bad in the medium to long run, should this pandemic induced business disruption continue for long. Incidentally, the budget presented yesterday also holds several sops for these small businesses. The government has announced to pay statutory sick pay to anyone who is asked to undergo the self-quarantine procedure and that it will reimburse the sick-pay bills for 14 days in full, for 2 million companies with fewer than 250 employees.

As a fallout of the epidemic, a scheduled meet of the British Government and European Union functionaries on Brexit negotiations was put off indefinitely. In Europe, several countries have been very severely affected by the pandemic. Given the level of threat that the country has now come under, the Italian government has pledged $28.3 billion to fight the outbreak of the virus. The European Central Bank, while not announcing any stimulus measures yet, has to convene a meeting of its functionaries in Frankfurt to deliberate on the crisis while German chancellor Angela Merkel has pledged that her government will do whatever it takes to wheatear the storm.

The country had not been hit very severely during the breakout of the SARS epidemic, and there was only one infected case in the Republic of Ireland, and yet unprecedented measures had been taken to protect the country from the outbreak at that time. The country thus had not seen such a massive public healthcare phenomenon in a very long time.  Given the severity of the situation, the rate cut, and the stimulus will not be sufficient to effectively deal with the situation. Several policy measures have to be undertaken by the government, specifically directed towards the epidemic, to effectively deal with the situation. People have already started to stock up supplies for a long time and have started to confine themselves in their homes. This itself could lead to a massive healthcare crisis in the long run, as many of the patients suffering from other healthcare-related issues require constant healthcare attention. Should the conditions for home confinement continue for long, this could very well become a far more explosive healthcare emergency than the current threat of the epidemic.

Prime minister Johnson has a pretty arduous task cut out for himself. For a country which was just about recovering from the pre-Brexit economic downturn, the threat of the coronavirus has come as a double whammy. It will be an extremely challenging task for the British government to device and implement appropriate policy measures to keep the economy on track, keep everybody healthy, treat the already infected and see the country through this arduous period. Though the country has still not gone into a recessionary phase, the forces that could push the country into such a state are at their strongest.