UK Budget 2020: How it emphasized on public health, pensions and public capital spending

The much-anticipated budget in the second term of the Boris Johnson government was finally presented on the floor of the House of Commons in the British parliament on 11^th March 2020. Rishi Sunak, the new Chancellor of the Exchequer, had a very arduous task at hand, providing adequate development funding to an economy which has been recovering after a long period of volatility, induced by the uncertain pre-Brexit economic climate. On the other hand, allocating adequate funds to fight against coronavirus that has in a short period of time emerged as one of the biggest threats to the British people and its economy, was the additional challenge.

The Boris Johnson government, which had come to power with the poll plank that the United Kingdom was stagnating under the erstwhile regime of the European Union, had promised drastic measures to bring employment and growth back to the country. During the Pre-Brexit days, the government was on an austerity drive trying to save money in every way possible; several major infrastructure projects were slowed down as a result leading to massive cost and time overruns. During the Pre-Brexit days, monetary policy measures were not very helpful in arresting the economic downfall either. The loose monetary policy followed all through the pre-Brexit period did not do much; instead by the end of 2019, the country was in such a state that reducing interest rates any further could have put it in a liquidity trap, thus requiring a firm and urgent policy measures. Since the swearing-in of the new government, several elements in the Boris Johnson government had been hinting that the government has been planning an outlay of as much as £1 trillion of public expenditure in forthcoming years. The spending, among other things, is meant to spur growth in the weakened economy that has been battered severely in the past couple of years because of the Pre-Brexit Jitters.

The budget presented on Wednesday did have some glimpses of some of these intentions but, given the current exigency, the government has allocated as much as £30 billion in funding as a stimulus to fight the massive disruptions that have taken place due to the coronavirus pandemic and has also provide adequate funding to the NHS, which is working round the clock to limit the spread of the virus.

Below we have tried to evaluate the budget on three critical issues of Public health, Pensions and Public Investments, and have tried to access how the government has dealt with them for the benefit of the average British citizen.

Public Health – The budget has given Public Health the top priority, given the current extent of the spread of the highly contagious coronavirus. The government has promised to provide all possible funding may it be millions or billions of Pounds to NHS, which is currently entrusted with the task. This massive threat to public health threat has been having a significant impact on the economy of the country. Given the increasing number of infections in the past few days, more and more people are staying indoors; employers are advising employees to work from home, wherever possible. This has led to a massive fall in revenues of businesses in the country at all levels of activity. Given the delicacy of the situation, the government also announced a contingency stimulus package of £30 billion to help businesses who are facing business disruptions because of the outbreak. The government will also be providing statutory sick pay to individuals who would be self-isolating. Sick notes to those people would be available by contacting NHS helpline 111. It is worth noting in this regard that the country has reported nearly 800 infected cases with ten already dead because of the infection.

Pensions – On the issue of pensions, the government has raised the threshold for pensions tax relief up to an annual income of £200,000. Previously the value was set at £150,000, and people above that level had their incomes tapered down. Most people earlier also could save £40,000 per year in a pension plan tax-free. The Chancellor provided a boost of £90,000 to the above two measures in order to determine where the tapering process starts.

Also announcing support for NHS workers dealing with the coronavirus crisis, the Chancellor said that the government would take about 98 per cent of consultants and 96 per cent of General Practitioners out of the taper among those who are currently engaged in the healthcare effort. The government also announced that it would reduce the minimum level to which the annual allowance can be tapered to £4,000 from £10,000 which would only impact those who have a total income close to £300,000 a year. While welcoming the changes brought in by the government in providing pension tax relief to the people, many experts in the country have, however, criticized the government for not availing of the opportunity to simplify the pension tax system in the country which is overtly complex and causes unnecessary hardship to the pensioners.

Public capital spending – The Chancellor has committed nearly £640 billion of gross capital expenditure directed towards providing schools, hospitals roads, railways, power and communication networks across the country by the year 2024-25. The government will also be coming out with a National Infrastructure Strategy later during the year and provide further information on how the allocation will be broken down. The budget further stated that strategic roads would receive funding of over £27 billion between 2020 and 2025, about £4.2 billion has been allocated for five-year, integrated transport settlements for eight city-regions in the country in addition to £1 billion that has been allocated to execution-ready projects. Funds to the tune of £5.2 billion have been allocated for defence between 2021 and 2027. Allocation towards housing has been increased to £10.9 billion to support the target of 1 million new homes by the end of the tenure of the current parliament. On the education front, the government has committed to spend nearly £1.5 billion over the next five years to refurbish further education colleges in the country and has also committed to creating a £2.5 billion National Skills Fund to further buildup on the adult skills in the country. The fund will be utilized to boost investments in science, engineering, technology and mathematics education in the country along with capital spending to set up eight new Institutes of Technology and eleven new schools for mathematics.

Though the budget has dealt with a number of other pressing issues faced by the country, the above three are perhaps the most critical. The government’s commitment to building a country that will be one of the leading nations in the century can be realized only if adequate attention is given to the country’s health systems, public infrastructure and most importantly retirees and other dependent people, who have contributed so much to the country during their productive days.