Christopher Snowdon

The true cost of coronavirus on our economy

Britain’s overreaction will leave scars that define the decade

When future historians look back on 21st-century mortality statistics, they will struggle to find anything out of the ordinary in Britain in 2020. When they look at the economic data they could be forgiven for thinking we were hit by an asteroid.

The Office for Budget Responsibility predicts a fall in GDP of around 12 per cent in 2020, the equivalent of having the 2008-09 recession twice in one year. The second quarter saw GDP fall by 20.4 per cent, breaking the record set during the Great Frost of 1709. The economy rallied by 6.6 per cent in July — which sounds impressive until you consider that it only took the economy back to where it was in the spring of 2013. The full impact on unemployment won’t be known before the furlough scheme ends, but the OBR expects it to treble to over four million, the highest number since the 1930s.

The furlough scheme cost £35 billion and is one of many reasons why the public finances are in such a wretched state. In July, total government debt passed the £2 trillion mark for the first time. The national debt has doubled since ‘austerity’ began in 2010 and now amounts to 104 per cent of GDP, a level not seen since the immediate aftermath of the second world war.

‘We’re down from 50,000 cases a day to two.’

At the start of the year, the OBR expected public-sector net borrowing to be £55 billion. It is now forecast to be £322 billion. Public spending is predicted to rise by £182 billion while tax receipts fall by £130 billion. Nearly every form of tax is bringing in smaller revenues. It is no surprise that fuel, alcohol and air passenger duties have dwindled, but the government is also expected to get £21 billion less in corporation tax than originally forecast; £23 billion less in income tax; £7 billion less in stamp duty; and £11 billion less in business rates.

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