UK aid bill is third highest in the world

BRITAIN has the third highest coronavirus economic support bill among the world’s leading economies, according to the International Monetary Fund.

It says that the UK has leapt above Japan to become the third biggest spender on Covid-19 support, relative to the size of its economy, among the G20 group of nations.

The UK is spending more than 15 per cent of GDP on providing loans, equity and guarantees to businesses, as well as over 3 per cent in the form of direct government spending.

In first place is Germany, which has allocated around 5 per cent to direct support from the state and more than 30 per cent to providing loans, emergency cash and guarantees. Italy is in second place, spending a sum equivalent to more than a third of the size of its economy.

According to the IMF, the amount spent globally to fight Covid-19 has grown to $9 trillion (£7.4 trillion), an increase of £820.9 billion since April, as countries have stepped up their efforts to contain the damage caused by the virus. Just more than half of that money has been allocated to loans, direct cash injections and guarantees.

On Friday, data from the Office for National Statistics showed that the Government borrowed a record £61 billion last month to fund its Covid-19 response. The figure for April is the highest monthly total ever and almost double what economists had predicted.

The spending watchdog, the Office for Budget Responsibility, believes the total bill for Covid19 may be around £300 billion.

However, Institute for Fiscal Studies deputy director Carl Emmerson said that the final figure could be higher or lower, as we do not know how long the disruption will last or when the economy will recover.

“The borrowing figures highlight how much uncertainty there is,” he said. “I wouldn’t be surprised if the final figure is £250billion or £350billion. We have no idea how long lockdown will continue for or what level of support the Government will have to provide.”

The Chancellor’s decision to extend the furlough scheme until the end of September has helped to push up Britain’s bill.

Emmerson warned that unless the Government takes a targeted approach to weaning companies off it, entire sectors could be devastated.

“The risk is that on the one hand it is too much for some sectors, and for others, if you withdraw support too quickly you could end up with business that could be profitable going to the wall,” he said.