UK Budget: Massive giveaway is a sign of trouble ahead – leader comment

Huge UK Budget stimulus announced by Chancellor Rishi Sunak may struggle to offset damage of Brexit, coronavirus and other global economic problems.

Chancellor Rishi Sunak unveiled his first Budget on Wednesday, just four weeks after taking up the role. (Picture: AFP via Getty Images)

After more than a decade of tough times for many, three major threats to the UK economy are looming.

First, there is the self-inflicted damage of Brexit, although the scale of this will not start to become clear until the end of the current transition period and will depend to a large degree on what kind of trade deal is agreed with the European Union.

Second, there have been a number of warning signs that the global economy as a whole could be heading for trouble. And the third, of course, is the Covid-19 coronavirus outbreak, now declared a pandemic by the World Health Organisation after cases outside China increased 13-fold in two weeks.

Shortly before WHO director-general Dr Tedros Adhanom Ghebreyesus warned of “alarming levels of inaction” and urged governments to take “urgent and aggressive” measures, UK Chancellor Rishi Sunak – unexpectedly plunged into the second biggest job in Britain just a month ago – stood up to announce a £30 billion stimulus package, partly designed to help get the country through the looming outbreak, along with an extra £175 billion to be invested in “world-class infrastructure” over the next five years.

According to the Office for Budget Responsibility, this was “the largest planned sustained giveaway at any fiscal event since Norman Lamont’s ill-fated pre-election Budget in 1992”, although that only lasted for a few months until the UK was humiliatingly forced out of the European exchange rate mechanism so this Budget may become an event of much greater significance in this country’s history.

Sunak’s assured performance gave no hint of such national embarrassment, although some may have found his repeated variations on the theme of “getting it done” – there were 26 of them – a touch irritating.

The coronavirus outbreak is a crisis that has arrived seemingly out of nowhere, but it has done so at a particularly bad time. The UK Government was already planning a stimulus, apparently fearing just how far the drop off the Brexit cliff-edge might be – and a backlash from Leave voters who imagined their lives would improve once ‘control’ was wrestled back from Brussels by Westminster. So if the world economy gets into difficulties, the UK may feel it more than most. But this stimulus was of epic proportions. In the words of the Scotsman’s Bill Jamieson, it released “a tsunami of money” that should mean the end of austerity. While low interest rates make the borrowing necessary to fund all this spending less of a burden, there are obvious risks.

If all this cash is not spent well – oversight by experienced civil servants will be vital – or if the economic effects are too severe to be offset in this way, the UK could find itself in a particularly difficult situation. However, as we don’t know how bad the coronavirus outbreak will get or what kind of Brexit trade deal we will get, this is all speculation.

More immediately, Sunak’s Budget will mean an extra £640 million for the Scottish Government, although Scottish Finance Secretary Kate Forbes said she was seeking “urgent clarification on what funding Scotland will receive”.

It seems fairly certain that the Barnett formula will mean Scotland will get a reasonable chunk of extra cash, which it will be able to spend as it wishes. So surely, one priority should be to help our local authorities which have suffered from relentless cuts over the past few years. Councils are responsible for many of the frontline services that matter most to the public – schools, social care, fixing potholes and the like. The Scottish Government will need to ensure the NHS has the resources it needs to take on the coronavirus outbreak and may face other competing demands, but easing the financial pressure on Scotland’s councils would make a real difference to many people’s lives, including some of our most vulnerable citizens.

And that might be money well spent as a global economic storm brews.