The UK’s recovery from the economic damage caused by coronavirus will be “swifter and more sustained” than previously thought, Rishi Sunak told MPs as he set out his Budget.
But he warned it would take “a long time” to rebuild and pledged to do “whatever it takes” to support people.
The Office for Budget Responsibility (OBR) expects the economy to return to its pre-Covid level by the middle of next year – six months earlier than they previously thought – but Mr Sunak acknowledged that “coronavirus has done and is still doing profound damage”.
He told MPs that despite the £280 billion of support already committed to protecting the economy the damage done by the virus has been “acute”.
“Our economy has shrunk by 10% – the largest fall in over 300 years. Our borrowing is the highest it has been outside of wartime.
“It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation. But we will recover.”
The Chancellor said the OBR expects the economy will be 3% smaller than it would have been in five years’ time because of the coronavirus crisis, but that the economy is forecast to grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.
In his Budget the Chancellor:
– Extended the stamp duty holiday from the end of March until the end of June, then a new £250,000 threshold will apply until the end of September.
– Confirmed the extension of the furlough scheme until the end of September, although employers will be expected to make a contribution from July.
– Extended the 5% reduced rate of VAT for the tourism and hospitality sector to the end of September, with an interim rate of 12.5% for another six months after that.
– Continued the business rates holiday for the retail, hospitality and leisure sectors until the end of June, with a two-thirds discount for the remaining nine months of the year.
– Announced the temporary £20-a-week increase in Universal Credit payments will continue for a further six months.
– Set out a new Recovery Loan Scheme to replace previous coronavirus loan packages, allowing businesses of any size to apply for loans from £25,000 up to £10 million through to the end of the year, with the Government providing lenders with an 80% guarantee.