UK markets open in 5 hours 8 minutes
  • NIKKEI 225

    28,359.11
    -571.00 (-1.97%)
     
  • HANG SENG

    28,779.97
    -456.82 (-1.56%)
     
  • CRUDE OIL

    64.31
    +0.48 (+0.75%)
     
  • GOLD FUTURES

    1,690.70
    -10.00 (-0.59%)
     
  • DOW

    30,924.14
    -345.95 (-1.11%)
     
  • BTC-GBP

    33,805.61
    -3,406.67 (-9.15%)
     
  • CMC Crypto 200

    938.89
    -48.32 (-4.89%)
     
  • ^IXIC

    12,723.47
    -274.28 (-2.11%)
     
  • ^FTAS

    3,792.09
    -16.15 (-0.42%)
     

Factbox: Sunak under pressure to spend more on COVID-19 in next budget

William Schomberg and David Milliken
·4-min read
FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak is seen at Downing Street in London

By William Schomberg and David Milliken

LONDON (Reuters) - Finance minister Rishi Sunak is under pressure to do more to protect the economy and fund the fight against COVID-19 in his March 3 budget, having already increased spending and cut taxes by over 280 billion pounds ($385 billion).

Following is a summary of coronavirus-related measures taken so far by Sunak and their expected cost, which will drive Britain's budget deficit to a record high, excluding world wars.

With the economy again under strain from COVID lockdowns, demands for more help are mounting up at the Treasury.

However, if the government meets its targets for vaccinations and relaxes the restrictions, the extra costs should be much lower than at the onset of the pandemic.

JOB RETENTION SCHEME

The scheme to save jobs has been central to Sunak's strategy since last March and its cost will surpass 70 billion pounds by the end of April, when it is due to expire, according to the National Institute of Economic and Social Research think tank.

Employers and unions want the scheme to be extended after the government ordered a new lockdown in January.

SELF-EMPLOYED INCOME SUPPORT SCHEME

Three grants for the self-employed have cost 18.5 billion pounds so far, and the third grant is still open for claims. Sunak will give details of a fourth grant in his budget plan. NIESR estimates the total cost will reach 30 billion pounds.

EXTRA PUBLIC SERVICES SPENDING

Sunak will have to keep spending more on health and other public services - such as transport subsidies - in the 2021/22 financial year which starts on April 1.

Britain's budget forecasters estimate that Sunak is on course to spend an extra 127 billion pounds on public services in 2020/21 due to COVID, and had already committed to a further 59 billion pounds of COVID-related spending for 2021/22.

Demands are also growing for increased spending in other areas such as education to help children catch up on the learning they have missed due to school closures.

BUSINESS LOAN GUARANTEES

The government has so far guaranteed 70 billion pounds of bank loans, mostly to small businesses, and the government's audit office has raised the risk of defaults and fraud.

The government's Office for Budget Responsibility has said losses are likely to be around 29 billion pounds.

Applications for loans can be made until March 31, creating the risk of further losses.

WELFARE - WILL EXTRA HELP BE EXTENDED?

Sunak increased Britain's main welfare benefit by 20 pounds a week last April and raised other welfare spending too at an additional cost of over 8 billion pounds for 2020/21.

The 20-pound-a-week increase is due to expire in April this year and Sunak is under pressure to keep it, or find another way of helping people on the lowest incomes.

SCOTLAND, WALES AND NORTHERN IRELAND

The Treasury says Scotland, Wales and Northern Ireland are to receive an extra 16.8 billion pounds to combat COVID and help firms before the end of the financial year on March 31. More support is expected in the next financial year.

HELP FOR BUSINESSES

The cost of grants for firms required to close due to COVID was estimated at 34 billion pounds for 2020/21 by the OBR in November. This includes 10 billion pounds in property tax exemptions, 12 billion pounds in grants and 10 billion pounds in deferrals for value-added tax and payroll taxes.

Hospitality and accommodation firms have benefited from a cut in value-added tax worth 2.5 billion pounds.

In January the government announced an extra 4 billion pounds of grants to help businesses through a third lockdown.

The Confederation of British industry has demanded a further three months of exemption from property taxes and a longer deferral of other tax bills.

PROPERTY PURCHASE TAX

Purchases of houses and apartments costing under 500,000 pounds have been made tax free this financial year, at a cost to the government of 2.3 billion pounds, the OBR estimates.

Sunak is reportedly considering an extension of the tax break.

(This story refiles to remove extraneous word from headline, no changes to story)

(Writing by William Schomberg; Editing by Toby Chopra)