UK TO SUFFER WORST ECONOMIC DECLINE IN 300 YEARS

Thu 26 November 2020:

Britain’s finance minister Rishi Sunak has outlined the UK government’s spending plans for the next year, against the backdrop of huge damage to the public finances wrought by the coronavirus pandemic.

Appearing before MPs, the Chancellor of the Exchequer said that while the health emergency was not yet over, the economic emergency was only just beginning.

Citing OBR (Office for Budget Responsibility) forecasts in his address, Sunak said the economy was due to contract by 11.3% this year, calling it the largest fall in output for 300 years.

Even as growth returned in the coming years, economic output would not go back to pre-crisis levels until the fourth quarter of 2022, and the economic damage from COVID-19 was likely to be lasting.

The pandemic and the response to it had caused a significant increase in borrowing and debt, Sunak said. Borrowing would be £394 billion (€441.8 billion) this year, or 19% of the country’s GDP, the highest in the UK’s peacetime history.

Debt would be 91.9% of GDP this year, rising to 97.5% in 2025-26, he said. In comparison, government debt in the eurozone stood at 95.1% of GDP in the second quarter of 2020, according to Eurostat, the EU statistics agency.

Ruling out a return to austerity, the chancellor gave more details of spending plans for public services and to fight unemployment, having already announced £4.3 billion (€4.82 billion) in programmes to help people find work.

But 2.6 million people are expected to be unemployed by the second quarter of 2021 at 7.5%.

Chancellor Rishi Sunak laid bare the grim economic toll of the virus as he set out a package of new measures in Wednesday’s Spending Review.

He said: “Our health emergency is not yet over, and our economic emergency has only just begun.

“So our immediate priority is to protect people’s lives and livelihoods.”

He said borrowing was “clearly unsustainable” over the medium term.

Documents from the OBR show the combined hit of the pandemic and the Government’s economic response pushed the deficit this year to £394 billion, its highest level since 1944-45.

Debt rose to 105 per cent of GDP, its highest level since 1959-60.

The UK has fared worse than other major economies with GDP forecast to fall by 11.3% this year, compared to 8.3% in the Euro area and 4.3% in the US.

The government’s objective was to protect low incomes, he added, saying the 2.1 million lowest paid workers would get a £250 (€280) minimum rise. This meant most public sector workers would get a pay rise, Sunak said.

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