Rishi Sunak has been forced to redraw next week’s budget to focus on shoring up the economy against the impact of coronavirus.
After Sajid Javid’s abrupt resignation from the Treasury last month, Sunak’s first major statement was due to herald a radical departure from the cautious Conservative economic policies of the past decade.
But a No 10 source said the budget would now “prioritise economic security” in the face of the growing threat from the virus.
Some potential reforms are likely to be shelved until another budget – with the possibility that the autumn statement could be upgraded to a full budget this year – while the government continues to assess the scale of the outbreak. Officials said more support measures could be announced sooner than autumn if necessary.
Treasury number-crunchers are not yet convinced there is any need to stimulate demand in the economy, along the lines of the €3.6bn (£3.14bn) package announced by Italy, which has been hit hard by the outbreak.
UK public spending was already due to increase as a result of the one-year spending settlement announced in the autumn, with a further significant increase expected at the three-year spending review later this year.
Sunak’s immediate focus is expected to be on targeted measures aimed at minimising the effect on businesses and ensuring public services can continue to be provided.
“We understand that people across the country are worried, but I assure you that we are taking firm action to support your families, your businesses and the public services on which you rely,” the chancellor said.
“We are well prepared for this global threat and, as the wider economic picture becomes clearer, we stand ready to announce further support where needed.”
Sunak updated the Cobra emergency committee on the economic situation on Monday, as ministers signed off on the government’s plan for trying to slow the spread of the virus.
Boris Johnson, who has been accused by Labour of being a “part-time prime minister” in recent days, will announce details of the coronavirus “battle plan” at apress conference on Tuesday, as the government tries to show it has a grip on the outbreak.
The plan is expected to include a major public information campaign, stressing the importance of regular handwashing – as well as keeping in reserve the option of a “social distancing” strategy, urging the public to work at home and minimise travel if it spreads further.
The Bank of England joined other central banks on Monday in promising to take steps to prevent the virus destabilising markets, and “ensure all necessary steps are taken to protect financial and monetary stability.”
Forecasters are scrambling to analyse the potential economic impact of thousands of workers “self-isolating”, travel plans being cancelled, major events being reorganised and cities being cordoned off.
The developed-country thinktank, Organisation for Economic Cooperation and Development, halved its GDP growth forecasts for global economic growth on Monday as a result of the crisis, calling it the “gravest threat” since the financial crisis.
The prime minister acknowledged that the government was conscious of the potential economic risks, as the disease continues to spread.
“Something like a mass epidemic is going to have all sorts of consequences and there is always the potential for an economic downside … and we are ready for that. But don’t forget the fundamentals of the UK economy are very strong.”
