UK pledges $39B for virus fight

The UK is facing a 'significant impact' from coronavirus, even if the hit is likely to be temporary.
The UK is facing a 'significant impact' from coronavirus, even if the hit is likely to be temporary.

London - Bank of England makes surprise rate cut to all-time low to support economy

By Reuters

Published: Thu 12 Mar 2020, 2:52 PM

Last updated: Thu 12 Mar 2020, 4:54 PM

Britain unveiled a £30 billion ($39 billion) economic stimulus plan on Wednesday to tackle the risk of a coronavirus recession, just hours after the Bank of England slashed interest rates in a double-barrelled response to the crisis.
Prime Minister Boris Johnson's finance minister, Rishi Sunak, announced the plan as part of a debt-fuelled investment surge for the coming years that budget forecasters said was the biggest stimulus since 1992 after a decade of austerity.
Sunak said the world's fifth-biggest economy was facing a "significant impact" from the virus, whose rapid spread has stoked fears of a global recession and shaken financial markets, even if the hit was likely to be temporary.
"Up to a fifth of the working age population could need to be off work at any one time. And business supply chains are being disrupted around the globe," Sunak said in an annual budget speech to parliament on Wednesday. "I will do whatever it takes to support the economy."
The 39-year-old former Goldman Sachs analyst, who has only been in the job for a month, said he would help companies facing a cash-flow crunch, including a year-long suspension of a property tax paid by smaller firms, and funding for sick pay.
He said companies and self-employed people would be able to defer tax payments and he relaxed sick pay qualification rules for workers and people on benefits.
Britain's health system and other public services would receive an extra £5 billion to help counter the spread of coronavirus. At least six people have died in Britain and 383 coronavirus cases have been confirmed, including a junior health minister from Johnson's Conservative Party.
Johnson had hoped the first tax-and-spending plan of his new government would showcase his plans to direct investment towards poorer regions, where voters helped him to a big election victory in December.
But with medical officials warning of an expected jump in coronavirus cases in the coming weeks, Sunak had to fund new spending priorities.
Public investment of more than £600 billion over the next five years, to levels not seen since 1955, represents a turning point for Britain after a decade of austerity to narrow its budget deficit.
Paul Johnson, head of the Institute for Fiscal Studies think-tank, said Sunak's pledge to increase spending on public services by 2.8 per cent a year was remarkable. 
"As the Chancellor says this is much faster than economic growth," he said on Twitter. "With investment spending rising even faster, something has to give."
PwC chief economist John Hawksworth said Sunak was taking a calculated risk by committing to a spending surge in the face of uncertainties about coronavirus, Britain's ability to secure a European Union trade deal and the global economy.
"Time will tell if this gamble pays off," he said.
BoE in surprise rate cut
The Bank of England on Wednesday slashed its main interest rate to 0.25 per cent in an emergency move to combat the fallout from the coronavirus outbreak on the UK economy.
In a statement, the BoE said that at a meeting, "the Monetary Policy Committee voted unanimously to reduce Bank Rate by 50 basis points to 0.25 per cent".
The reduction from 0.75 per cent heads a "package of measures to help UK businesses and households bridge across the economic disruption that is likely to be associated with Covid-19", the central bank added. The move was the BoE's biggest rate cut since the global financial crisis more than a decade ago.
"Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months," the BoE said in its statement.
"Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies."

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