Rishi needs ‘road map’ to steer us out of debt
SENIOR MPs last night urged Chancellor Rishi Sunak to begin work on a long-term plan for reducing the colossal Treasury debt run up during the coronavirus crisis.
Members of the Commons Treasury Committee acknowledged that the Government will borrow billions more over the coming months to protect lowincome households from the impact of the economic slump triggered by the lockdown.
But they also warned that the Chancellor will need “a road map for how the Government plans to deal with the debt”.
The warning came after the committee last night heard predictions from leading economists at the International Monetary Fund (IMF) and Organisation for Economic Cooperation and Development (OECD) that lowincome, low-skilled workers will be hardest hit by the slowdown in UK growth.
Redundancies
It comes ahead of Mr Sunak announcing more measures to support the economy through the easing of lockdown next week.
And concerns about the economic downturn intensified yesterday as the John Lewis retail giant warned of store closures and fashion chain Topshop threatened redundancies.
Tory MP Mel Stride, chairman of the Treasury Committee, said: “With the Chancellor set to provide an economic update next week, the IMF’s chief economist has made it clear that now is not the time to start dealing with the public debt, but that it could be the time for planning a longer-term strategy.
“With the IMF and OECD telling us that those most impacted by the crisis are often low-skilled, low-income workers, who often tend to be women and minorities, it’s essential that the Government gets this right. “When he provides his update next week, the Chancellor, should, at a minimum, provide a road map for how the Government plans to deal with the debt.”
During yesterday’s committee hearing, IMF chief economist Gita Gopinath told the MPs: “The first half of this year was the deepest contraction we have seen.
“Because economies are reopening we are seeing signs of recovery. We can see the worst is behind us, maybe, in many economies but that is not guaranteed.”
She forecast an “initial spurt” of growth followed by a more “gradual” recovery later this year.
“This is going to be a somewhat prolonged recovery with many countries below their pre-crisis levels even at the end of 2021.”
The IMF had recently forecast that the UK economy will shrink by 10 per cent this year but grow by around six per cent next year.
Prof Gopinath said: “Because we don’t have a health solution at this point, we expect there will be more persistent social distancing in the second half of this year and the scarring that comes with that.”
Laurence Boone, chief economist at the OECD, told the committee: “The UK is among the OECD countries together with France, Spain and Italy being particularly hurt in part because of the strict confinements and because of the importance of services in the UK.”
Despite the ongoing crisis, MPs last night voted themselves a sixweek summer break.