Rishi Sunak ditched a decade of Conservative economic orthodoxy on Wednesday and claimed the Tories were now “the party of public services,” as he turned on the spending taps with a £30bn package that leaves Britain on course to have a bigger state than under Tony Blair’s Labour governments.

On a day when the World Health Organization declared Covid-19 to be a global pandemic, the chancellor announced £12bn to buttress the economy against the immediate threat of recession and a further £18bn to deliver on Boris Johnson’s election pledge to “level up” the UK.

Sunak said he knew how worried people were by the spread of Covid-19 since the crisis emerged in China at the start of the year and said £5bn of extra public spending and £7bn of support for households and businesses was “temporary, timely and targeted”.

Sunak’s spend, spend, spend budget is tough for Labour to attack Read more

The chancellor’s claim that he would do “whatever it takes” to see the economy though its most testing period since the 2008-09 financial crisis was was part of a coordinated day of action kicked off by a half-point cut in interest rates from the Bank of England. It was the UK’s first emergency rate cut since 2008.

“The British people may be worried, but they are not daunted,” he said. “We will protect our country and our people.”

But doubts were raised about whether the budget’s help for low-income workers was generous enough at a time when the government’s own estimates suggest one in five people could be off work at any one time.

And there was criticism from Labour for the budget’s failure to address social care, despite Johnson claiming during his leadership bid last summer that he had a plan to deal with the looming crisis.

Sunak said he was prepared to do more if necessary after announcing cash grants, credit guarantees and a business rates holiday for small and medium sized companies likely to be affected by a dramatic drop in consumer demand triggered by a Covid-19 slowdown.

The chancellor also announced an expansion of statutory sick pay and a relaxation of benefit rules designed to help vulnerable workers over what he admitted would be a tough period.

Torsten Bell, the chief executive of the Resolution Foundation thinktank, said: “Significant action to support firms affected by coronavirus is very welcome and should help ensure the temporary shock does not do them lasting damage. In contrast to significant help for firms, targeted support for families affected by coronavirus was less evident. Self-employed people becoming ill will see faster benefit payments, but the government has left two million low-paid employees ineligible for statutory sick pay.”

The government’s response to Covid-19 came too late to be included in the forecasts for growth and borrowing compiled by the independent Office for Budget Responsibility, which said there was a risk of recession in the event of “widespread economic disruption”.

The tax and spending watchdog predicted that the largest sustained easing of policy by the Treasury since the pre-election budget of 1992 would fail to prevent growth over the next five years being even slower than in the decade following the financial crisis. The government will be responsible for half the economy’s growth over the next two years, the OBR added.

Sunak’s spending pledges were only partly funded by higher taxes and are mainly being financed by a decision to reverse the downward trend in borrowing seen since the economy emerged from the 2008-09 financial shock. Net borrowing, which hit £38.4bn in 2019, is planned to rise to £66.7bn in 2022.

Bell said: “For the years ahead, the chancellor has increased public spending significantly while being very reluctant to raise taxes to pay for it. While the Conservative government even a few years ago aimed for a smaller state and zero borrowing, these plans mean a bigger state than under Tony Blair paid for by more borrowing than Gordon Brown.”

The Labour leader, Jeremy Corbyn, dismissed the chancellor’s claim that his budget marked “the beginning of a new era in this country”.

Corbyn said: “The government’s boast of the biggest investment since the 1950s is, frankly, a sleight of hand. In fact, it is only the biggest since they began their slash-and-burn assault on our services, economic infrastructure and living standards in 2010. Having ruthlessly forced down the living standards and life chances of millions of our people for a decade, the talk of levelling up is a cruel joke.”

With Boris Johnson and his de facto chief of staff Dominic Cummings chafing against any restraints on their costly plans for “levelling up” the economy, Sunak announced a review of the Treasury’s fiscal rules – instead of adopting the spending framework announced by his predecessor, Sajid Javid, during the election campaign.

Most Tory MPs greeted Sunak’s statement with delight, cheering enthusiastically as he listed Johnson’s manifesto promises, and repeatedly chanted “this budget gets it done”.

But Javid, who resigned just weeks before the budget rather than accept the wholesale sacking of his advisers, later warned against abandoning all spending rules.

And former prime minister Theresa May also sounded a note of caution, saying sound management of the public finances “has always been one of the unique selling points of the Conservative party”. She added that her party should continue to exercise “restraint and caution”.

Mujtaba Rahman of consultancy Eurasia Group said the spending splurge and lack of tax rises made this more like a pre-election budget than the first financial statement from a government with a majority of 80. “The dog that did not bark in this budget was tax rises. Sunak may have more to say about them in his autumn one,” he said.

Alison McGovern, chair of Progress, the centrist Labour campaign group, said: “The women and men working round the clock in social care will wonder at a chancellor and prime minister who do not see them, or those that they care for. Today was the day to give them a boost. It is not just an opportunity missed, it is an insult to all families with a loved one who needs support - and those struggling through with low pay and now coronavirus making life hard.”