Stripped-back Budget will include £5billion for flood defences

Chancellor Rishi Sunak will unveil a stripped-back Budget tomorrow with money for flood defences, faster broadband and tougher community sentences.

The coronavirus crisis is set to be the main focus of the Chancellor’s first financial package, with fears it could deal a hammer blow to the economy.

Alongside cash injections to help business and prop up the NHS, there are rumours of an emergency cut to interest rates.

However, Mr Sunak will be keen to show the government is still getting on with implementing its agenda – with money being earmarked to bolster law and order, upgrade flooding defences.

He must also decide whether to provoke what could be a brutal backlash from Tory MPs by announcing a rise in fuel duty. 

But there are mounting expectations he will instead choose to push ahead with cuts to national insurance, which could benefit millions of workers and help keep UK plc ticking over if there is a major outbreak.  

Just a month after he entered No10 in the wake of Sajid Javid’s dramatic resignation, Mr Sunak must walk a tightrope between honouring Tory election promises and bracing UK plc for what could be a very bumpy ride.

The minister has been forced to tear up previous plans, with extra resources likely to be needed for GPs and hospitals to deal with rising coronavirus infections.

Meanwhile, companies – particularly smaller ones – will need help to stay afloat amid warnings from experts that up to a fifth of the workforce could be off sick at the peak of an outbreak. 

Mr Sunak’s predecessor Philip Hammond warned this morning that the government must provide support to stop a ‘significant’ but temporary setback for the economy turning into permanent damage. 

Stock markets have been plummeting on fears over coronavirus and an oil price war between Russia and Saudi Arabia. 

At the weekend, Mr Sunak insisted he is ready to deliver ‘whatever action is required’ to deal with the Covid-19 outbreak, and has pledged to give the NHS the resources it needs to respond.

He also vowed to give smaller businesses ‘short-term’ support to weather the outbreak, saying he wants to provide a ‘bridge through a temporary period of difficulty so that they can emerge on the other side’.

However, he has refused to say whether he would adhere to the fiscal rules – parameters to limit tax and spend excesses – in the first Budget of the new Government.

The Conservative manifesto for the election stated the party would not borrow to fund day-to-day spending and would ensure debt is lower in five years’ time.

Speculation has been mounting that the Bank of England will cut interest rates by 0.25 per cent at its regular meeting later this month.

But traders are also pricing in a rising possibility that there could be another cut sooner – potentially as early as tomorrow to coincide with the Budget.

Mr Javid is thought to have been planning for a sharp rise in the national insurance threshold from £8,632 to £9,500 from next month.

That would mean a average family with two earners a tax cut of about £192 a year. 

Tory MPs have warned the Chancellor that hiking fuel duty in the Budget could hurt the NHS while it is under strain dealing with the coronavirus outbreak. 

Robert Halfon, the driving force behind a petition supported by 36 Tory backbenchers, said raising taxes at the pumps would have an impact on the health service.

He said it would be akin to ‘giving with one hand and taking away with the other’ if the Chancellor gave the NHS extra cash while raising fuel duty.

‘Our message to the Chancellor is that the economy is facing a major challenge in coronavirus,’ he said. ‘We should be helping ordinary folk and businesses, not hammering them with fuel duty charges. 

‘Don’t forget, the NHS is going to need a lot of extra money to deal with this kind of virus.

‘What’s the point though if you then put up fuel duty? Then the NHS will have to pay more as well because of the cost of transportation, ambulances and all that sort of thing.

‘They would be giving with one hand and taking away with the other.’ 

Senior Tories such as former party leader Iain Duncan Smith, ex-Brexit secretary David Davis and ex-transport secretary Chris Grayling were among the signatories to the letter, which Mr Halfon handed to Treasury officials yesterday.

Mr Halfon and his colleagues want a fuel duty freeze to be announced in the Commons on Wednesday.

And campaigners have flagged to Downing Street that – along with another 13 Tory MPs who signed a similar letter, led by ex-Cabinet minister Esther McVey, on February 24 – they have the numbers to bring about Boris Johnson’s first Commons defeat since securing his 80-seat landslide victory at the December election if Mr Sunak does opt to hike fuel duty.

The MPs’ letter co-ordinated by Mr Halfon was backed up with a petition by FairFuelUK, which garnered more than 134,000 signatures.

The Chancellor will set aside £100million to bolster the probation service and support victims of rape and sexual assault.

Convicted criminals released from prison on licence half-way through their sentences will face tighter constraints, including stricter curfews.

And offenders known to commit crimes after drinking will be fitted with so-called ‘sobriety tags’, which monitor their location and sample skin perspiration to determine whether they have consumed alcohol.

Last night Mr Sunak promised ‘new funding to toughen up community sentences, crack down on domestic abuse and provide victims with the support they need’, as a cross-party group of MPs called for a major investment in youth services to help prevent knife crime and protect children from a life of crime and violence.

Mr Sunak is also expected to pledge £9million to tackle fly-tipping and double cash for flood defences to £5.3billion. 

Last week the Treasury announced that Mr Sunak will commit to new laws to protect the future of cash as free-to-use ATMs disappear from the high street. Another £5billion will be set aside for faster broadband across the country by 2025.

Mr Sunak will also announce that disabled people will benefit from a £30million investment in fully accessible public toilets, while the ‘tampon tax’ – VAT on sanitary products – will be abolished in 2021.