Why we must heed Chancellor Rishi Sunak’s warning – leader comment
The economic crisis caused by the coronavirus pandemic requires us to pull together just as we have been doing against Covid-19.
The Office for Budget Responsibility recently estimated that the UK Government could spend £300 billion this financial year in an attempt to alleviate the economic damage caused by the coronavirus pandemic. However, given this was based on assumptions about a relatively swift return to ‘normal’ and that the cost of the furlough scheme, tax cuts and deferred tax rises is rapidly closing in on this staggering total, it is likely that the actual sum will be considerably higher in the next OBR forecast.
Chancellor Rishi Sunak’s mini-budget yesterday saw spending pledges that could be worth up to £30 billion with cuts to stamp duty and hospitality sector VAT, a scheme to encourage employers to hire young people, and discounts for eating out in August.
It was, he said, “a plan for jobs” designed to confront “profound economic challenges” that have resulted in the UK economy shrinking by 25 per cent in just two months – the same amount it had grown by over the past 18 years.
“People need to know that although hardship lies ahead, no one will be left without hope,” he added, attempting to balance the need to stave off any sense of despair with the need to tell the public straight about the situation we are currently in.
For, to a degree, the success of the measures taken so far to protect jobs has masked the reality that we now face and the public has not yet been forced to come to grips with the true size of the problem.
There were signs of just how bad things could get in the response to the Chancellor’s statement. The Confederation of British Industry welcomed the latest measures as “an important step forward” but warned “many viable firms are facing maximum jeopardy right now”, saying nearly 70 per cent of firms were running low on cash. Further “immediate direct support” was “still urgently needed”, the CBI added. Despite the vast sums being spent, the question on many people’s minds is, will it be enough?
The UK Government’s spending may fall short of Franklin Roosevelt’s famous New Deal, but these are very different times and the success of that policy may have been given a gloss by the economic boom which took place in the US during the Second World War. Spending a similar amount today would be reckless and foolish.
But there may still need to be further big-spending announcements in the weeks to come, ahead of the Chancellor’s Autumn Statement in October, the next major staging post as we attempt to navigate our way out of this crisis.
In doing so, it is absolutely vital that we realise just how serious it still is. Not least because this isn’t just a British problem – the whole world is suffering with the International Monetary Fund expecting the deepest global recession since records began, as the Chancellor pointed out in his speech.
So while the virus may be in retreat – thanks in large part to the public’s adherence to draconian restrictions on our freedom during lockdown – no one should suppose that we are out of the woods yet. The Chancellor’s warning that “hardship lies ahead” must be heeded.
The best response is to pull together, just as we have been doing in the fight against Covid-19. To remember that we are all in this together because, whether we like it or not, our fortunes are intertwined. Be kind. Stay strong. We can get through this.
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