By William Schomberg
LONDON (Reuters) – Britain’s emergency public spending surge and tax cuts to soften the coronavirus hit to the economy will cost around 133 billion pounds ($169 billion) in the current financial year, the fiscal watchdog has said, helping to lift the budget deficit to wartime levels.
Following is a summary of the Office for Budget Responsibility’s estimates of how much finance minister Rishi Sunak’s rescue package is likely to cost.
For a story on the June 4 OBR estimate, click on
PAYING WORKERS’ WAGES – 54 BILLION POUNDS
The centrepiece of the plan to shield Britain from the full force of the crisis is the Coronavirus Job Retention Scheme which is now paying 80% of the pay of 8.7 million workers who are temporarily laid off, for up to 2,500 pounds a month each.
The scheme was backdated to March 1 and runs until the end of October with only small contributions from employers starting in August.
SELF-EMPLOYED WORKERS’ INCOME – 15 BILLION POUNDS
People who get most of their income from self-employment with trading profits of up to 50,000 pounds will receive grants of 80% of their average monthly profits over the last three years, also for up to 2,500 pounds per month.
Sunak announced last week that the scheme would be extended and pay a second round of slightly smaller grants.
29.3
EXTRA SPENDING ON HEALTH, OTHER SERVICES – 17.3 BILLION POUNDS
The government has promised much more spending on health as well as some extra cash for local authorities, vulnerable individuals, rail services hit by a slump in passenger numbers and funding for devolved administrations.
WELFARE, SICK PAY CHANGES – 9 BILLION POUNDS
Sunak said in March he would raise the main Universal Credit state-paid benefit by 1,000 pounds a year for the next 12 months and make it easier for people to claim sick pay.
BUSINESS GRANTS, TAX CUTS – 29.3 BILLION POUNDS
Sunak also announced in March property tax cuts for retail, hospitality and leisure businesses for a year as well as grants and other help.
STATE-BACKED LOANS – 5 BILLION POUNDS
The OBR said it was difficult to know how many loans made under Britain’s new state-backed credit programmes would turn bad. It assumed 10% of write-offs in the current financial year on 50 billion pounds of lending. The OBR said it expected further write-offs in future.
VAT DEFERRALS – 3.1 BILLION POUNDS
The government allowed businesses to defer payments of value-added tax as the crisis escalated. The OBR said some of the payments would never be made because a number of companies are likely to have gone bust before the tax becomes due.
BIG TAX HIT TOO
The OBR has said Britain’s budget deficit could hit nearly 300 billion pounds this year as the coronavirus shutdown pushes the economy into a nosedive and hammers tax revenues. It has said the deficit could hit 15% of economic output this year, back to levels last seen in World War Two.
($1 = 0.7875 pounds)
(Editing by Emelia Sithole-Matarise)
