Chancellor Rishi Sunak has announced more measures to be taken by the government in an effort to reduce the economic damage caused by the coronavirus. The new measures amount to additional billions to be spent by the treasury and takes pandemic spending to £190 billion.
The Chancellor made a budget-style statement in Commons yesterday, announcing the raft of new measures designed to protect and create jobs during the coming global recession, with a new cost of £30 billion on top of the billions already spent in combating coronavirus.
Rishi Sunak started by reiterating the severity of the damage, pointing out that 18 years of GDP growth had been effectively wiped out in just two months by the pandemic and the resulting lockdowns.
The announced measures included previously leaked ideas like expansions to job training schemes, and an increase in the Stamp Duty threshold. The previously rumoured VAT cut was also confirmed; with the hospitality and tourism industries enjoying a VAT cut from 20% to 5%. This will see hot food, hotel rooms and theme parks with a reduced tax bill, though opinions are divided on whether this saving will be passed onto customers or used to bolster these struggling businesses after months of shutdown.
For this year the government seems content to spend their way out of the crisis, and is increasingly raising concerns that there will need to be a reckoning in the years to come, with many asking how the spending will be paid for.
Jobs are clearly the largest concern for the government at the moment however, with all of the measures designed to try and keep businesses from letting go of employees as the furlough scheme winds downs in the next few months, or creating new jobs where possible. The Chancellor was clear however that they could not save every job, saying "'Is unemployment going to rise, are people going to lose their jobs?' Yes, and the scale of this is significant."
Many companies however have already warned of closures to come. Even today, John Lewis has announced the permanent closure of eight of its department stores, while Boots have announced job losses totalling 4,000. The announcements will be a blow for the government, showing that the measures being offered by the Chancellor are insufficient to offset the huge loss in income for some businesses.
The measures of course are all based on the idea of continued suppression of the virus in the UK, which would allow for restriction easing to continue. So far, the UK has been relatively successful in its efforts, but if cases do grow as more businesses reopen then any reintroduction of lockdowns will cause more damage that even the current spending would fail to help.
With gold prices breaking past $1,800 per ounce yesterday, the global situation is even more uncertain. Cases are rising rapidly in the US, and second wave fears are growing in many other countries, with Australia having to reintroduce restrictions in many parts of the country. The price rise then reflects the increasing number of investors turning to gold to help protect their wealth in these unprecedented times.