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Budget analysis: Little cheer for London as Rishi Sunak forced to dig deep to balance books

Evening Standard logo Evening Standard 03/03/2021 Jonathan Prynn

Perhaps the most shocking number in the blizzard of figures announced by Rishi Sunak in his Budget statement today is the £234 billion that he expects to have to borrow in the coming financial year even after the pandemic is – hopefully - over.

As he told MPs, this will be the second biggest sum in British fiscal history, far bigger than anything seen during the global financial crisis

The vast scale of the black hole in Britain’s national finances is the result of the more prolonged support he has had to provide to the economy as a result of the savage second wave of the pandemic.

This will result in huge sectors, particularly hospitality, retail and the arts, largely shut down until deep into the Spring.

The forecast for GDP growth this year has also been slashed from 5.5 per cent to 4 per cent compared with the November forecasts.

Next year’s yawning deficit helps to explain why he has been less generous than expected on certain measures such as the business rate holiday - extended in full for only three months  - and VAT relief, which is rolled forwards in full for just six months.

The Chancellor has also had to raise the rate of corporation tax higher than big business will be comfortable with - increasing to 25 per cent. The freezing of allowances to as far ahead as 2026 is a further indication of how deep the current occupant of Number 11 Downing Street will have dig until well after the next election to help make the books balance.

For London there was little to cheer. A succession of initiatives name checked northern and Midland towns and cities that delivered the election win for Boris Johnson in December 2019. A great Budget for Leeds and Rochdale, not so much for Lambeth or Redbridge.

For the capital, a freeport for the Thames estuary was one of the few explicit positives from a Budget that made no reference to Brexit and the severe problems that has caused many businesses, not least those in the City.

However, the property  sector -  always a mainstay of the London economy – will certainly get a boost from the widely expected three month extension of the stamp duty holiday and the new mortgage guarantee for buyers with only small deposits.

But despite all the well trailed “sweeties” the underlying message was a sombre one. The pandemic was a once in a lifetime challenge that hopefully is close to being met by the rapid roll out of the vaccine. But clearing up the wreckage and rubble of the economic earthquake caused by coronavirus will be a job that will take decades to complete.


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