Boris Johnson urged to commit billions to businesses in coronavirus 'wartime' response
Boris Johnson must treat the coronavirus outbreak as a “wartime situation” and offer billions of pounds more to help businesses survive the crisis, the official public spending watchdog has said.
The chair of the Office for Budget Responsibility (OBR), Robert Chote, told the Prime Minister "now is not the time to be squeamish" about adding to the national debt to keep firms afloat.
Speaking to the Treasury Select Committee, he said the Government should take a “blunderbuss” approach to bailing out companies.
“When the fire is large enough you spray the water and worry about it later," he added.
It comes as the Chancellor Rishi Sunak is set to outline further measures to deal with the negative economic impact of Covid-19.
He announced £12billion of funding in last week’s Budget, but after official guidance changed to urge people to end all “non-essential contact” he is being called on to go further.
Mr Chote said it would not be an “abdication of budget responsibility” to increase spending: “We ran, during the Second World War, budget deficits in excess of 20% of GDP five years on the trot and that was the right thing to do.
"We are ready for the needs to put that up again as needs to."
He added: “This is not a time to be squeamish about one off additions to public sector debt. It’s more like a wartime situation.”
Mr Chote said a big fiscal package to support UK businesses would be “money well spent”, but warned some companies will not survive the upcoming downturn.
“I think there will inevitably be some scarring effect here that will persist for a while but hopefully relatively small,” he added.
That view was echoed by Sir Charles Bean from the OBR’s budget responsibility committee, who said the Government needs to act as insurer of last resort for firms.
“You need state to be there as the insurer of last resort against what is effectively an act of God,” he added. “The state surely has to have a role.”
His comments came after the Association of British Insurers that most business would not be protected even if the Government were to order their closure.
Mr Johnson has already come under for suggesting customers stop going to pubs and restaurants, rather than demanding they shutter.
In a statement, the ABI said: “Irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus.
“Standard business interruption cover - the type the majority of businesses purchase - does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.”
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