In his first Budget, Rishi Sunak unveiled a package of fiscal stimulus measures to see the United Kingdom through the economic consequences of Covid-19. As Sunak explained, the primary economic consequence of the disease is that it produces a demand shock – through a combination of people in quarantine or off sick, demand will be taken out of the economy. He unveiled a little over £1bn of measures to support workers, largely through expanding the eligibility and generosity of the UK’s welfare system, with a similar amount to support businesses through the crisis, via a tax holiday.
The major oversight here appears to be parents and carers: there were no specific measures to help either group take time off, whether to care for sick dependents or to look after children if schools and other institutions have to close. But the direction of travel here is clear and sensible, with Sunak focusing on expanding the reach of existing schemes rather than creating new ones. He has temporarily scrapped the need for face-to-face meetings to receive benefits, abolished the minimum income threshold to receive Universal Credit and expanded the eligibility for sick pay.
The package, as currently unveiled, is probably some way short of the necessary cushion for the demand shock, but given the market reaction to these measures, (the market fell as he announced his stimulus package), Sunak may have reasoned that a fuller response today would cause both market and actual panic. What matters more is probably that the Chancellor has signalled he will do, in his words, “whatever it takes” and his preferred lever is to expand the reach of existing state services, rather than building new ones.