Rishi Sunak urged to pump £200bn into the economy and hand everyone a £500 voucher in wake of ‘unprecedented’ coronavirus crisis
The Chancellor will unveil the Government’s latest economic measures on Wednesday. (PA)
Rishi Sunak is being urged to match the “unprecedented” coronavirus pandemic with a £200bn recovery package which would include £500 high street vouchers for everybody.
Ahead of a Wednesday economic update from the Chancellor, the Resolution Foundation think tank warns that the UK economy could shrink by 9.3% this year — suffering its biggest annual hit in a century.
And they say that the economic recovery pencilled in for next year by the Bank of England and the Office for Budget Responsibility will be far more sluggish than predicted, at just 6%.
Until a Covid-19 vaccine is available, the foundation predicts that Britain’s “new normal” economic capacity could be five percent lower than before the crisis — with Mr Sunak urged to use the economic update to prepare for a “big and long-lasting hit”.
The think tank says the £200bn stimulus spending — equivalent to 10% of Britain’s gross domestic product — should include a £17bn-a-year job support package, including an extension of the Government’s furlough scheme for sectors that have been particularly hard hit.
On top of that, a new Job Protection Scheme should be brought in to subsidise the wages of workers in sectors including tourism, retail and hospitality as they get back to work — while young people should be guaranteed a job.
And the think tank also calls for a £30bn ‘High Street Voucher’ scheme, which would see adults handed a £500 credit to be spent in hard-hit sectors of the economy such as face-to-face retailers and leisure providers.
Children should be given £250 as part of the bid to avoid whole sectors of the economy going under.
Mr Sunak is also urged to cap the repayments of loans handed out to businesses during the crisis at five percent of turnover in a bid to avoid further pressure on businesses coming out of the crisis.
And the Resolution Foundation calls on the Government to “treble down” on its “levelling up agenda” by going much further than Boris Johnson’s ‘New Deal’ pledge last week to boost capital spending.
They want the Treasury to allocate £14bn in the current fiscal year to infrastructure and repair projects rather than £5bn.
According to the Foundation’s analysis, the new package would push the UK’s debt-to-GDP ration to 106% — but they warn that a “no-stimulus” approach could see the UK economy take another eight percent hit and risk one million jobs.
‘LIKE NO OTHER CRISIS’
Launching the report, Resolution Foundation research director James Smith said: “The covid-induced economic crisis is like no other crisis we’ve seen. And with interest rates already at record lows, the Chancellor will need to take the lead in delivering an ambitious policy response to secure Britain’s economic recovery.
“The measures the Chancellor announces in his mini-Budget tomorrow need to be big enough to reflect the size of the crisis we face, targeted at the sectors that need the most support, and flexible enough to cope with the uncertainties that lie ahead.”
He added: “Having passed his daunting first test of protecting firms and households from the sharpest ever economic shock, the Chancellor now faces the far tougher challenge of securing the recovery. The jobs and living standards of millions depend on getting this recovery plan right.”
Labour, which has been pushing a message of “jobs, jobs, jobs” ahead of the Chancellor’s statement on Wednesday, said the report shows “the enormous long-term costs of mass unemployment to the UK economy”.
Shadow Chancellor Anneliese Dodds added: “The Government must abandon their 'one-size-fits-all' approach to withdrawing the Job Retention and Self-Employment schemes, and develop support for jobseekers using examples like Labour's Future Jobs Fund.
“They must also increase their ambitions for supporting infrastructure beyond the largely reannounced projects promoted by the Prime Minister last week, which amounted to a tenth of Germany's package."