Gerard Lyons

Rishi Sunak has bridged the economic gap. But what comes next?

(Getty images)

Yesterday’s measures from the Chancellor were necessary. His timely assistance focused on a new targeted and temporary job support scheme to replace the expiring furlough, easing loan repayment terms for firms and a wider, more flexible VAT regime.

One needs to examine the details of these to ensure that they are as comprehensive as they should be. Lest we forget, the Treasury Select Committee highlighted large groups were excluded from help previously. But there was a boldness to the announcements that goes some way to answer those who wanted the Furlough Scheme extended.

The Chancellor addressed the immediate need to bridge the gap between the ending of existing support and the hoped for return to normal of the economy next spring. But, both yesterday and in cancelling the Budget, he has avoided addressing the issue of affordability.

Understandably, there is always going to be an element of catch-up in much of the policy stance during a pandemic, with the Chancellor responding often to the latest actions or events that have hit the economy hard.

At some stage soon, however, as he seems to recognise, the Chancellor needs to put at ease peoples’ and firms’ likely growing anxiety about how this will be paid for. Indeed, his necessary actions today have not yet been fully costed.

Just as the last decade has shown that unconventional monetary policy has become the norm, we are now in the space of unconventional fiscal policy. This comes with the unavoidable price of a new crop of zombie firms, staying afloat, servicing debts.

Despite that, it is good to see that the Chancellor has stepped up to the plate. The problem in the UK is not that assistance is being provided in these difficult economic times, it is that when the economy performs well policy tends not to put back on an even keel.

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