Last month, Chancellor Rishi Sunak announced a huge £330billion bailout package for businesses in a move to drastic “wartime” measures to battle the deadly COVID-19 pandemic. He scrapped business rates for a year and promised huge cash grants for shops, pubs and other high-street outlets hit by a collapse in customer footfall. Mr Sunak has also made a number of other spending pledges amounting to hundreds of billions of pounds, including protection for the self-employed and households that might be struggling to pay monthly bills.
Despite the hundreds of billions of pounds being spent, companies are still collapsing under the massive economic strain – with millions of jobs already lost and unemployment rates threatening to spiral out of control over the coming months.
The Chancellor has warned the UK economy could shrink by as much as 35 percent during the April to June quarter, increasing fears the nation could plunge into a recession deeper than the 2008 financial crisis and one of the most severe in more than a century.
Last week, the Centre for Policy Studies think tank warned Government borrowing to repay the huge costs could soar to an eye-watering £300billion this year – enough to fund the desperately over-stretched NHS twice over.
Ben Harris-Quinney, chairman of the Bow Group think tank, fears it could be at least a decade before the Government is able to begin attempting to reduce the deficit and national debt – following a similar pattern to the financial crisis 12 years ago.
But he warned since then, national debt has already doubled and the annual deficit is only just starting to be reversed, and with the same pattern likely to be followed again, “we will all pay the price”.
Mr Harris-Quinney told Express.co.uk: “In the first year, the Government will likely focus on supporting and growing the economy towards recovery, Government borrowing and spending during this period will likely be very high compared to recent years.
“In five years years, the Government will need to pay that money back and they will likely aim to do so via a combination of cuts, quantitative easing, and tax increases.
“In 10 years, the Government will likely be aiming to reduce the deficit and national debt to prevent debt payments dominating the budget. A similar pattern was seen after the 2008 economic crisis.
“Since then the national debt has doubled and the government has only just begun to reduce the annual deficit, because of what happened in 2008, our contingency is smaller now than it was then.
“The Bow Group consistently warned of this danger, the Government did not fix the roof while the sun was shining and now we will all pay the price.”
Mr Harris-Quinney also warned Britons of the “chilling reality” of the cost to the economy from the coronavirus crisis running into trillions of pounds, telling them to brace for an “unholy trinity of spending cuts, tax rises and inflation.”
The country is currently in the dark over how the Government plans to pay back the huge money being spent, but millions of people fear they could be heavily hit in the pocket.
The Bow Group chairman said: “The ultimate cost to the UK economy of coronavirus is likely to run into the trillions.
“The Government cannot entirely protect the economy or taxpayers from that chilling reality.
“These levels of spending mean that the entirety of the Government’s economic strategy had been torn up.
“The deficit reduction strategy has been torn up and it is likely many other aspects of Government spending such as HS2 will be reviewed.
“The fallout will mean UK citizens are likely to see an unholy trinity of spending cuts, tax rises and inflation.”
The Bow Group chairman warned “placing the burden on taxation or inflation would be unwise for long term economic growth”.
But he said: “The total cost of the coronavirus crisis will likely run into trillions, both in terms of government spending and overall cost to the economy.
“It will require a complete rethink on how the country and government operates going forward.
“Placing the burden on taxation or inflation would be unwise for long term economic growth, but the government will likely attempt to use all measures at its disposal to balance the books in the short term.”
Published at Sun, 26 Apr 2020 08:00:00 +0000