UK needs £100bn more in support for business — think tank

British finance minister Rishi Sunak should follow the lead of the United States by announcing a £100 billion stimulus push in next week’s budget to fuel an economic recovery from the Covid-19 pandemic, a think tank said on Thursday.

Sunak, who is due to announce a new budget plan on March 3, has already racked up more than £280 billion  ($395 billion) in coronavirus spending and tax cuts, pushing Britain’s borrowing to its highest since World War Two.

The Resolution Foundation said Sunak should extend emergency support for businesses and workers and announce a new round of stimulus measures to alleviate unemployment, boost green investment and help retailers.

Together, these measures would equate to an additional £100 billion of stimulus, a smaller-scale version of the massive recovery plan announced by new US President Joe Biden.

“While in the U.S. debate has focused on President Biden’s $1.9 trillion stimulus plan, the UK debate has got stuck on how to withdraw support,” James Smith, research director at the Resolution Foundation, said.

“Instead, the Chancellor should combine extending existing support with fresh stimulus once restrictions are lifted to deliver a 100 billion pound plan to boost Britain’s recovery.”

The Resolution Foundation, which last year predicted that Sunak would need to U-turn on plans to phase out the furlough scheme, said he should commit £27 billion towards a retraining and job support package to reduce unemployment.

It also recommended making permanent a 20 pound weekly increase to the Universal Credit benefit for the low paid and unemployed, an 18 billion pound green investment programme, and £30 billion extending existing emergency support for workers and firms.

Including a further £9 billion for a voucher scheme to boost Britain’s high streets and retailers, the Resolution Foundation said its proposals amounted to a stimulus plan equivalent to around 5 per cent of British economic output.

While smaller than the Biden plan, which is equivalent to 9% of U.S. output, the Resolution Foundation said this reflected the fact that Sunak has already provided significant support.

At a later date, tax rises will be needed to pay for the extra support, the think tank said.

“At that point around £30 billion of consolidation will be needed to balance the current budget – and build fiscal policy space for future recessions,” the Resolution Foundation said.