The British economy will “get worse before it gets better” as the country battles the pandemic, Chancellor Rishi Sunak has warned.
Indeed, the chancellor told MPs the new national restrictions are necessary to control the spread of the coronavirus.
However, he said they will have another significant economic impact,
“Even with the significant economic support we have provided, over 800,000 people have lost their jobs since February,” he said.
“Sadly, we could not and cannot save every job and every business.
“But I am confident that our economic plan will support the finances of millions of people and businesses.”
The chancellor said “the road ahead will be tough,” but maintained that the government is “making the difficult but right long-term choices for our country.”
He said fiscal stimulus to date has totaled more than 280 billion pounds, while 1.2 million employers have laid off nearly 10 million workers.
At the same time, three million people have benefited from subsidies for the self-employed, he said.
Sunak said he would “keep at the back of his mind” calls for an extension of business tax breaks and further support for the hospitality industry at the March budget.
Shadow Chancellor Anneliese Dodds accused Mr. Sunak of having “no ideas” and offering “nothing new.”
She said, “The purpose of an update is to provide us with new information, not to repeat what we already know.”
The chancellor’s words reflect the fact that the early months of 2021, with a widespread shutdown, are likely to see a further contraction in the UK economy and probably an official double-dip recession. This reflects the nationwide physical closure of the hospitality and retail sectors, as well as the effect in the data of school closures as well.
In addition, consumers and workers are likely to be more cautious when the vaccine is introduced. So it is a very strange kind of economic tripwire. The challenge in the coming weeks and months will be greater, although not as great as it was last April. But beyond that, there is hope for something normal.
For the chancellor, however, who is preparing a major budget in early March, this means further delaying measures, such as tax increases, to deal with historic levels of pandemic public debt.