The UK government is expected to announce a two-part economic recovery strategy through June and July to set out how the Treasury expects to support those who lose their jobs as a result of the Covid-19 pandemic and support vulnerable businesses and industries.
The Prime Minister will make a major speech in June, in which he is expected to outline the principles of his government’s economic recovery strategy. Then, the Chancellor is expected to bring a Covid-19 economic recovery package to Parliament before the summer recess on 21 July 2020.
Treasury officials have confirmed that this will not be a full emergency Budget, but a ‘fiscal event’ to outline specific policies to mitigate the economic impact of Covid-19. It’s speculated that the recovery package will be presented to parliament on the week commencing 6 July 2020.
Unlike a full Budget, it’s unlikely the recovery package will contain a range of tax changes, but this is not to say changes can be ruled out.
What to look out for:
- Funding for new training schemes to retrain workers after the Coronavirus Job Retention Scheme (CJRS) ends in October.
The latest figures from the government show that 8.4 million jobs have been furloughed at a cost of £15bn. The scheme will be tapered from August to reduce the level of government support and from October, the government will pay 60% of wages up to £1,875 and will not pay NICs or pension contributions.
- Infrastructure investment projects.
The government delayed the publication of their flagship infrastructure strategy, which was originally intended to be published alongside the Budget on 11 March 2020. It is likely the strategy will be repurposed as a basis for a stimulus package to boost industry and support jobs. The strategy was also intended to outline the UK’s industrial strategy for achieving net zero emissions by 2050, and the government may use Covid-19 as an opportunity to bring forward more radical industrial changes to meet their commitments.
- Assistance for British-based technology companies.
As a key proponent of technology, the Prime Minister’s chief adviser, Dominic Cummings, is likely to be the driving force behind proposals to support British-based technology companies after Covid-19. Any increase in funding for the sector will come on top of a commitment made in the March Budget to increase R&D investment to £22bn by 2024/25. It is also likely that the UK tech sector will be a crucial part of the net zero puzzle and any support will be conditional on their environmental credentials.
- Changes to tax policy.
The OBR has estimated that the pandemic will reduce government tax receipts by £130bn in 2020/21 against the Budget projection and increase spending by £88bn. It is unlikely that the “fiscal event” will contain radical changes to tax policy given the need to ensure that consumers spend once lockdown measures end. However, radical changes could be on the horizon as the government is faced with the largest deficit since the Second World War and the July announcement could set the direction for changes to come.