The watchdog has revealed the economy will shrink 35 per cent this quarter and borrowing will reach £298.4 billion. This figure is an increase of £25billion on the public sector net borrowing which was predicted last month. The coronavirus furlough scheme is expected to cost a net £50billion. The OBR has based these staggering figures on the lockdown lasting three months and it being partially lifted over another three months.
The furlough scheme, covering income for the self-employed and grants and loans for businesses are forecast to cost £123billion for this financial year.
The OBR said: “There is insufficient detail for us to reliably estimate the cost of the post-July period at this stage, though the Chancellor has said he expects the Treasury to continue paying ‘the lion’s share’.”
The watchdog said the government’s decision to throw money at the crisis could prove beneficial in the long run.
They said: “The measures are designed specifically to support the economy through this temporary shock and so they should help prevent greater economic and fiscal damage in the long term.”
Chancellor Rishi Sunak has said the Government would continue with its wage subsidy scheme until the end of October.
Last week the Bank of England warned that the pandemic could see the economy of the country fall by 14 per cent in the biggest drop since records began more than 300 years ago.
“It’s also important to remember that the pre-existing benefit system in the UK focuses on supporting families with children, offering less support to childless workers who become unemployed than the benefit system in, for example, Germany, France or Italy.
“This means that the UK would, if anything, need a larger bespoke package than those countries to guarantee a similar level of income support to all types of workers.”
Published at Thu, 14 May 2020 19:15:00 +0000