Sunak to unveil budget aimed at helping firms deal with coronavirus

Rishi Sunak is poised to announce a package of emergency measures to support businesses hit by the knock-on effects of the coronavirus crisis in his first budget on Wednesday.

The chancellor is considering short-term tax holidays for affected businesses, and taxpayer support for small businesses whose employees self-isolate as the outbreak escalates, the Guardian understands.

Tax holidays – covering VAT, national insurance and other levies – were used during the foot-and-mouth outbreak of 2001 to help farms and other businesses facing a short-term cash crunch. The cost was subsequently estimated at £242m.

Q&A

How can I protect myself from the coronavirus outbreak?

The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the Wuhan coronavirus, for which there is no specific cure or vaccine.

The UN agency advises people to:

  • Frequently wash their hands with an alcohol-based hand rub or warm water and soap
  • Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing
  • Avoid close contact with anyone who has a fever or cough
  • Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers
  • Avoid direct, unprotected contact with live animals and surfaces in contact with animals when visiting live markets in affected areas
  • Avoid eating raw or undercooked animal products and exercise care when handling raw meat, milk or animal organs to avoid cross-contamination with uncooked foods.

Despite a surge in sales of face masks in the aftermath of the coronavirus outbreak, experts are divided over whether they can prevent transmission and infection. There is some evidence to suggest that masks can help prevent hand-to-mouth transmissions, given the large number of times people touch their faces. The consensus appears to be that wearing a mask can limit – but not eliminate – the risks, provided it is used correctly.

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With thousands of employees expected to be asked to stay at home as the virus becomes more widespread, officials have also been examining a temporary reintroduction of the statutory sick pay rebate.

That policy, abolished by the coalition government in 2014, allowed smaller firms to claim a rebate on part of the cost of paying sick pay when the proportion of their staff who are absent passed a set threshold.

Boris Johnson, the prime minister, has already announced that the government will legislate to ensure statutory sick pay (SSP) is available from the first day of absence.

Mike Cherry, chair of lobby group the Federation of Small Businesses, said: “The government needs to recognise that if it wants to make SSP terms more generous, already squeezed small firms need financial support to deliver them.”

The government has committed to taking steps to support self-employed and gig economy workers asked to remain at home. Whitehall insiders said Matt Hancock, the health secretary, was particularly concerned about the issue.

Johnson told MPs on Wednesday: “We will take every step we can to make sure that… no one whether employed or self-employed – whatever the status of their employment – is penalised for doing the right thing.”

Josh Hardie, the deputy director-general of the Confederation of British Industry, said: “People should be supported to follow public health guidance without fear of not being paid. The CBI is calling for the extension of statutory sick pay rights to the low-paid and contracted workers such as agency staff and those on variable or zero-hour contracts. Where the burden of cost starts to become too great, especially for smaller firms, it should be shared fairly between business and the government.”

The incoming Bank of England governor, Andrew Bailey, made clear at a Treasury select committee hearing this week that small businesses in particular were likely to need financial backup. “We are collectively now going to have to provide some form of supply chain finance in the not too distant future,” he said.

After discussions with the Bank, Sunak is also expected to seek to reassure financial markets by outlining more drastic steps the government stands ready to take, if the virus exacerbates the slowdown in GDP growth.

The National Institute for Economic and Social Research has predicted the outbreak could knock 0.5% off economic growth this year.

The budget is also expected to open the way to greener taxes – beginning with the abolition of the VAT exemption for the red diesel used in tractors and construction vehicles.

“We want to move to a place where we tax things we don’t like, and support things we do like,” said a Whitehall source. That could also include ending the decade-long freeze on fuel duty – a measure long favoured by Johnson, but likely to provoke a furious backlash from Tory MPs.

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