We look at how the UK is going to pay the cost of lockdown

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We look at how the UK is going to pay the cost of lockdown

Blocking the UK has certainly saved lives that would otherwise have been lost to the corona virus.

Since Britain is one of the most affected countries in the world, it would put more lives at risk to unlock it.

Some restrictions have come to an end and more changes have been made in England than in the rest of the United Kingdom. However, it is expected that the suspension will continue in some form for months. It will be a slow process to leave it completely and return to normal life.

The blocking of millions of people has severely hampered the economy and has led the state treasury to spend billions to support vacation and backstop workers who cannot operate during the pandemic.

Britain has a few billion pounds left in the cookie jar, and she has to borrow substantial sums to fund all the plans and bailouts that will prevent the economy from collapsing.

There will be a point when the pandemic is over and the closure has ended. At this point, the focus will be on paying all of the costs associated with the pandemic. How will Britain pay for all of this?

The claim

The Daily telegraph reports that they have seen a confidential Treasury report saying that Covid-19 will cost Treasury £ 300 billion this year.

The document suggests that Chancellor of the Exchequer Rishi Sunak is launching a package of measures, including a freeze on public sector wages, a series of tax increases and the end of triple-lock pensions.

The “baseline scenario” for the economy is estimated to be that the UK has a budget deficit of £ 337 billion this year, well above the estimates in Sunak’s March budget that forecast a deficit of £ 55 billion and feel like a life before. It was two months and two days ago.

VAT hikes and income tax hikes will bring in some money for the government, but it would break a conservative manifesto promise not to raise taxes this year. The Tories also promised to triple pensions.

The report says it would be “very difficult” to pay for the lock without breaking that promise.

It also warns that Britain will face a “sovereign debt crisis” if the government is unable to get the economy going again soon after the ban ends.

The pandemic has already cost billions and will consume much more money before the end. UK public finances were already in a weak position before the corona virus and are severely damaged.

The money to pay off all the costs of the block must come from somewhere. Cost reductions and tax increases are likely to be required.

The counterclaim

However, the plans were criticized by Chancellor Anneliese Dodds. who demanded Sunak and Prime Minister Boris Johnson publicly rejected the plans .

She said 10 years of underfunding of public services had caused “a lack of resilience in our public services”, making Britain less able to deal with the corona virus.

A freeze on public sector workers would mean that many of the key workers we rely on most to treat Covid-19 receive their reward for not receiving a wage increase over a long period of time.

Police Federation leader John Apter said it was so “morally bankrupt” Freezing public sector wages, which would “financially punish” the people who are supposed to save our lives during the pandemic.

Sunak was also warned that measures to cover the cost of the lockdown risk could “stifle the economic recovery”.

Once the ban is over, much of the economic recovery will depend on people going out and spending money again. When taxes rise, people spend less and it takes longer for businesses to get back on their feet.

Less money for people means lower consumer demand. If consumer demand for the ban is too low, it may be difficult for some companies to remain open, which in turn can lead to job losses.

Paying the block is not as easy as cutting spending, lowering pensions and raising taxes. The money has to come from somewhere.

The facts

The UK economy fell 5.8 percent in March , the largest decrease since the monthly count began in 1997.

GDP fell two percent overall in the first quarter of 2020, the worst decline since the financial crisis. Stagnation follows in the last quarter of 2019.

Sunak expects a “major recession” The corona virus and a quick rebound after the lock is unlocked should not be taken for granted.

Economists hope for a “V-shaped recovery” in which the economy will recover quickly and return to a level before the pandemic, as all the places that had to be closed due to the closure can be reopened without causing permanent damage .

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Worse than the V-shaped recovery is the “U-shaped recovery” in which the economy does not recover immediately and we spend longer at the lowest point before we recover to a place that is worse than where we started when permanent damage was done.

The worst-case scenario is the “L-shaped recovery”, in which the economy sinks and does not recover significantly for a long time.

Triple lock pensions refer to the current pension guarantees introduced in 2010 by the coalition government. The triple-lock pension means that the value of a state pension increases by the highest value due to profit growth, price inflation or a minimum rate of 2.5 percent.

The abolition of the triple lock would invalidate the 2.5 percent guarantee and make state pensions dependent on the pace of profit growth or inflation.

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