Chancellor needs desperate measures to match desperate times

EYE-WATERING does not do justice to the size and scale of the financial crisis into which coronavirus has plunged Britain and – to be fair – much of the rest of the world, too.

An economy shrinking by more than 11% this year; the worse financial crash for 300 years and longterm effects that could drag on until 2025. This is not the sunlit uplands that Rishi Sunak, Britain’s great hope as Chancellor and – who knows? – party-leader-in-waiting had hoped to take us all to.

In the past, a Chancellor of the Exchequer who presided over such an appalling set of financial figures would be for the chop. Yet Mr Sunak remains, for the most part, the darling of the Conservative Party for making the best of an almost impossible situation and being bold to avert an even worse financial crisis that the one we have been landed with.

We say “for the most part” with good reason, however. Freezing the pay of millions of public-sector workers, many of whom – from teachers to bin men – went the extra mile at the height of the pandemic and kept society’s wheels turning against the odds, is unpopular and of questionable value.

Shadow Chancellor

Anneliese

Dodds was right to warn that depriving such a large proportion of the working population of a pay rise next year ran the risk of dampening the economy still further, just as it ought to be bouncing back and spending getting back to normal.

And there is understandable uneasiness at cuts to the overseas aid budget, effectively breaking a Conservative manifesto promise that should have seen it remain at 0.7% of GDP. It will go down to 0.5%.

However, desperate times call for desperate measures. And while there will be a lot of loud complaints about cuts to the aid budget and pay freezes for public-sector workers, many ordinary voters will feel that the need to pay back all the money borrowed to see us through the pandemic – and the further financial crisis that a predicted rise in unemployment to 7.5% in the second quarter of 2021 will cause – justifies the cuts.

Efforts to give the lowest paid a boost, through a modest extension of the living wage and a small increase in Universal Credit, had been criticised as too little, even before the Chancellor had sat down. Yet, again, it is hard to justify bigger increases, given the depth of the crisis that is only just beginning.

Pay freezes aside, however, it does not look as if Mr Sunak is going to take a similar course to one of his predecessors, George Osborne, and impose tough austerity measures to balance the books. That’s welcome.

And while the predictions, from the Office for Budget Responsibility, look on the very blackest side, there is hope among some economists that the money many people have saved during lockdown will be burning a hole in their pockets and purses once the vaccine roll-out kicks in, and they will help to spend Britain out of trouble.

In the meantime, belts will have to be tightened. Let’s hope the Chancellor has got the balance right and we really can bounce back, fast.