Paying workers may cost Treasury £132bn
Ministers warned over return of austerity to UK
THE GOVERNMENT’S coronavirus policy measures are expected to cost the Treasury more than £130bn, Britain’s financial watchdog has said, as Ministers were warned not to fall back on austerity to counter intense financial pressures.
The Office for Budget Responsibility (OBR) said it expects spending on furlough schemes and grants to the self-employed will cost an estimated £132.5bn in the current financial year, rising from £123.2bn at the last update on May 14.
Officials have previously said the extra spending was helping to partially offset the plunging gross domestic product (GDP) used to measure growth.
But after Prime Minister Boris Johnson warned on Wednesday there would be “many job losses” as a result of the economic impact of the crisis, cuts across a number of sectors were predicted yesterday.
About 1,500 jobs are set to be axed and another 12 showrooms closed at the struggling car dealership Lookers, as the group announced plans to slash costs in the face of the crisis and a tough car market. Aston Martin has said it plans to cut up to 500 jobs as part of a major restructuring at the luxury car manufacturer.
And tens of thousands of aerospace and aviation workers are set to lose their jobs as a result of the coronavirus crisis, an industry expert has warned.
Paul Everitt, the chief executive of the ADS Group, said redundancies will be made in the coming weeks and months because of the collapse in demand for flights.
The centre-right think-tank, Policy Exchange, said austerity should be avoided and tax increases are not necessary to deal with the financial impact of the crisis.
A paper instead urges the Government to take advantage of low inflation, rates and yields to borrow to reduce the debt to GDP ratio “gradually”.
However, it warns Ministers must have a “credible strategy to reduce the debt burden in the future” – and notes there is no “magic money tree”.
The paper, co-authored by Dr Gerard Lyons, Mr Johnson’s former chief economic adviser as London mayor, recommends giving temporary tax cuts to help the post-crisis recovery, including reductions in the rate of VAT and stamp duty.
Arguing for “a pro-growth strategy” which reduces unemployment and brings the public finances “back into shape”, the paper says: “High debt levels are financeable in this context, and austerity is not needed.”
Polling carried out for Policy Exchange suggested 75 per cent of the public are worried about rising levels of government borrowing and public debt, while 49 per cent are worried about having to pay higher taxes as a consequence. Only 16 per cent support a new round of austerity and cuts to public spending.