Rishi Sunak’s bid to limit economic damage of coronavirus will cost £105bn this year, say OBR
The OBR have calculated the additional borrowing needed to Rishi Sunak's measures (PA)
Rishi Sunak’s measures to protect the economy from the impact of coronavirus will cost the Treasury more than £100billion in extra borrowing this year, according to the independent economic watchdog.
The Office for Budget Responsibility (OBR) has calculated the total spending on the furlough scheme to pay 80% of staff wages will be £39billon in the 2020-21 financial period.
And they forecast the support system for the self-employed is likely to cost another £10billion.
But the OBR say that despite the heavy up-front cost, the policies introduced by the Chancellor could prevent lasting damage to the country’s finances.
Overall they say the direct impact of Mr Sunak’s announcements is £103.7billion - made up of £99.3billion in extra spending, and £4.4billion of tax cuts.
The other costs to the Treasury are an extra £16billion of spending on public services, £800million for charities, and £500million funding to local authorities for vulnerable people.
The Government’s package of additional welfare measures will cost £7billion, and there will be another £1billion handed out in sick pay.
And grants for small businesses will add £15billon on to the balance sheet, while a £13billion price tage for increased business rate relief.
The OBR also calculates that the postponement of controversial changes to the “off-payroll” system for freelancers and contractors, known as IR35, will result in £1.2billion less in taxation.
The watchdog said: “The measures are designed specifically to support the economy through this temporary shock and so they should help prevent greater economic and fiscal damage in the long term.”
The Treasury spokesperson said: “We have announced an unprecedented package of measures to limit long-term damage to the economy and public finances.
“These measures, which are designed to protect jobs and businesses, are temporary, and will lead to a short-term spike in borrowing.
"The public finances should return to a more sustainable position once the disruption is over.”