We’re facing the darkest hour, Bank chief warns
BRITAIN’S economy is facing its ‘darkest hour’ as the pandemic continues to ravage the country, the governor of the Bank of England has warned.
In a speech to business leaders yesterday, Andrew Bailey said the country is set for a difficult few months before the vaccine rollout takes effect.
And his deputy, Ben Broadbent, said that while the near-£50billion furlough scheme had helped to save the economy from a deeper recession, it was not a ‘free lunch’.
In a bleak warning to millions of families, the deputy governor said the wage support would be ‘funded by tomorrow’s taxpayers’, fuelling fears that Chancellor Rishi Sunak will soon launch major tax hikes.
Mr Bailey’s comments echoed a warning from Mr Sunak on Monday that the state of the economy could get worse before it gets better. In an online speech to the Scottish Chambers of Commerce, Mr Bailey said: ‘There’s an old saying about the darkest hour is the one before dawn.’
He added that the country was in a ‘very difficult period at the moment’ and that there was ‘no question’ that the resurgence in cases would delay the UK’s recovery from the pandemic.
The furlough scheme, which has seen the taxpayer spend more than £46billion so far on supporting the wages of
‘This isn’t a free lunch’
employees who cannot do their jobs due to the pandemic, has helped stop mass redundancies, Mr Bailey said.
But even so, the true unemployment rate is probably closer to 6.5 per cent rather than the 4.9 per cent last stated in official figures, he added, due to difficulties distinguishing between jobless people who are searching for work and those who are not.
That would take unemployment to its highest level since the start of 2014. In a separate online speech, held by the Bank of England, Mr Broadbent added that the furlough scheme had helped to support spending and prevent the country falling into an even deeper slump than it did in the first half of last year.
Output, or gross domestic product [GDP], fell by an estimated 10.5 per cent last year as the lockdown caused an 18.8 per cent contraction between April and June.
But retail spending unusually parted ways and climbed by more than 5 per cent over the year, as workers stuck at home invested in homeware and ways to entertain themselves. Mr Broadbent said: ‘GDP growth may have been the weakest on record but retail spending growth is just about the strongest.’
Without the furlough scheme, many households would have lost their jobs and would have had to drastically cut their spending.
Mr Broadbent explained: ‘ Perhaps the single most important factor is the introduction of the various furlough schemes. At the cost of a huge jump in government debt these have shielded household income from the drop in national income seen in the first half of last year.
‘Spending by today’s consumers has in part been sustained and funded by tomorrow’s taxpayers.’ But he added: ‘This isn’t a free lunch – higher government debt has to be paid for eventually.’
Despite the gloomy warnings from Bank officials, there was some optimism. Mr Broadbent said it was ‘dispiriting’ to have to give his speech ‘as we enter another national lockdown’.
‘But the mass vaccination programme now underway also provides genuine hope that this latest set of measures may be the last,’ he added.
RATHER than threaten ever more pernickety lockdown restrictions (could drinking a takeaway coffee on a daily walk really be criminalised?), the Government should focus its energy on rolling out the vaccine at full tilt.
Until tens of millions of people are inoculated, the resumption of normal life is a pipedream. Nevertheless, despite the Government’s myriad blunders during the pandemic, the vaccine programme has – so far – been a sparkling success.
Some 2.4million of the most vulnerable have had ‘game-changing’ jabs. And the UK has delivered more injections than the whole of the EU, whose procurement scheme is mired in squabbling.
But ministers cannot rest on their laurels. Failure to meet the target of two million jabs a week by the month’s end will not only cost lives, but forfeit public confidence.
The kitchen sink must therefore be thrown at the campaign. Full use must be made of GPs’ surgeries and community pharmacies. Centres should be open 24/7 to immunise people outside working hours. And is red tape being slashed sufficiently quickly to unleash an army of vaccinators?
This is an all-hands-to-the-pump emergency that requires creativity, flexibility and boldness – traits sorely lacking in the NHS.
Money should be no object. Leave aside the lives saved, there is an irrefutable economic case for action.
Even if a fortune was spent unlocking us from this nightmare just a few days early, it would still save Britain billions.
Echoing Sir Winston Churchill, the Bank of England governor warns our ravaged economy is facing its ‘darkest hour’.
Assuming ministers don’t want to see jobs, health and life prospects ruined they should, when rolling out the vaccine, heed the great war leader’s clarion call: Action this day.