Analysis by the Institute for Fiscal Studies (IFS) has found Government borrowing by the end of the coronavirus health crisis will soar to at least £120bn. Philip Booth a Senior Academic Fellow at the Institute of Economic Affairs has said around £60bn of that figure comes from reduced tax revenues as employees and businesses are placed on lockdown.
The Professor of Finance, Public Policy and Ethics at St Mary’s University said Rishi Sunak’s coronavirus relief package for employees, businesses and to improve social security is forecast to cost the Treasury the other £60bn.
Professor Booth insisted the huge economic impact of COVID-19 will result in national income to fall by at least 10 percent.
He said: “COVID-19 is a supply shock, huge amounts of capacity are being taken out of the economy.
“It would not be surprising to see a 10 percent fall in national income.
“It has been suggested that there is a demand shock too: there isn’t.
“The shock is to supply and the reduction in demand only arises because the supply of certain goods and services is effectively prohibited.”
The financial expert insisted the only way for the Government to get out of the red is to either increase taxes, increase borrowing through Government bonds or by printing more money, which will send inflation and the cost of living soaring.
Professor Booth said: “In war time and at the time of other supply shocks, of course, Governments have taxed, printed money and borrowed.
“But COVID-19 is not like an all-out war with the survival of the nation at stake. Experiences of countries printing money during shorter and partial supply shocks have not been good.”
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In the Spring budget Mr Sunak initially pledged £12bn to fight the virus.
Following the three-week lockdown, the Chancellor has since pledged £12bn to fund the job retention scheme for furloughed employees – which will cover 80 percent of salaries up to 2,500 per month.
In addition a £9bn package has been announced for the self-employed, £20bn on business rate relief and grants, and a £7bn package to improve social security.
This afternoon the Department of Health and Social Care 7,097 patients have died in hospital after testing positive for coronavirus in the UK as of 5pm on Tuesday, up by 938 from 6,159 the day before.