Late November should have seen the Chancellor announce his Autumn Budget and a Comprehensive Spending Review covering the next three financial years. Like many other plans, the uncertainty created by the pandemic has put both on hold. In their place was a ‘Financial Statement’, primarily addressing a one-year Spending Review, with a nod to the red ink contained in the Office for Budget Responsibility’s (OBR) Economic and Fiscal Outlook.
The last financial projections from the OBR were published a little over three months ago, so neither counted the cost of the various iterations of the Chancellor’s Winter Economy Plan nor allowed for the second period of lockdown. In August, the OBR’s central estimate was that the government would end up borrowing £372 billion in 2020/21, nearly seven times its March Budget figure of £54.8 billion. Data released last week showed borrowing in the first seven months of the financial year had already reached £214.9 billion. The OBR now expects a figure of just short of £400 billion in its central case for 2020/21.
Rishi Sunak presented his first Budget on 11 March, the day that the World Health Organisation declared Covid-19 to be a pandemic. At the time, the Chancellor described his Budget’s coronavirus initiatives as being “temporary, timely and targeted”. Their cost was put at £12 billion. Twelve days later the first lockdown began.
Since those early spring days, Covid-19 has dominated the government’s agenda and seriously weakened its financial position. Mr Sunak added to his Budget measures three times before March was out and has since further enhanced and extended support. By mid-October, claims made under HM Treasury’s two headline schemes, the Coronavirus Job Retention Scheme (CJRS) and the Self-Employment Income Support Scheme (SEISS), had amounted to over £55 billion. The schemes are not set to end until March 2021 and April 2021, respectively.
The economic consensus is that for now the financial focus is on survival, but the Chancellor has frequently indicated that a day of reckoning is on the horizon.