Coronavirus: Chancellor warns of 'tough times' as forecaster says economy could shrink by a third

Chancellor Rishi Sunak has warned that there are “tough times” ahead as the Treasury’s official forecaster said that the economy could shrink by a third and unemployment soar to 10 per cent as a result of coronavirus.

Speaking at Downing Street, Mr Sunak admitted that the government’s response to the fatal outbreak had not been perfect and that it had not been able to protect “every business and every household”.

But the chancellor insisted that the impact of the outbreak should be temporary and said he was hopeful that the economy will “bounce back” swiftly once the medical crisis is brought under control.

Mr Sunak was speaking as the coronavirus death toll in UK hospitals topped 12,000, with 778 people dying in the 24 hours to 5pm on Easter Monday.

But figures from the Office for National Statistics suggested that the true tally could be 10 per cent higher when deaths in care homes, hospices and the community are included.

Amid anger over the shortage of personal protective equipment (PPE) and coronavirus testing in care homes, Mr Sunak told staff and residents: “You have absolutely not been forgotten. There is an enormous amount of focus, whether it’s at the NHS, whether at Public Health England or elsewhere to make sure that care homes get the PPE they need, they get the testing they need, they get the support they need in every aspect of what they are doing.”

The latest daily death total was higher than those announced over the Easter weekend, but remained significantly below the record of 980 announced on 10 April.

NHS England national medical director Stephen Powis told a Downing Street press conference that the latest figures suggest the number of new cases and hospital admissions is “stabilising and plateauing” in London and other areas thanks to strong compliance with social distancing rules.

But Mr Powis warned that it was too early to relax restrictions, saying: “We absolutely need to make sure that we keep the benefits of this going forward and we don’t take a foot off the pedal, we don’t become complacent.”

Experts on the government’s Scientific Advisory Group on Emergencies (Sage) are believed to have agreed at a meeting today to recommend that ministers keep lockdown provisions in place when they come up for review on Thursday.

And Mr Sunak made clear that a return to normality was still some time off, saying: “These are tough times and there will be more to come.”

The independent Office for Budget Responsibility today set out a potential post-outbreak scenario in which UK GDP could fall by 35 per cent in the coming months and unemployment rise by more than 2 million to 10 per cent as the state deficit soars to £273bn.

Mr Sunak stressed that this outcome was not a prediction but an illustration of what could happen if the current lockdown lasts three months, followed by a three-month period when it is partially lifted.

A 35 per cent drop in GDP would be the largest quarterly decline for at least a century, while the extra borrowing envisaged by the OBR would be considerably higher than during the financial crisis of 2008.

Mr Sunak acknowledged that government “cannot protect every business and every household” with its unprecedented package of bailouts.

Asked if mistakes had been made, he said: “When you are faced with such an unprecedented challenge, are we going to be absolutely perfect on every single thing we do at the pace we have to do it? No of course not.”

But he added: “While the economic impacts are significant, the OBR also expect them to be temporary, with a bounce back in growth.

“The OBR today have been clear that if we had not taken the actions we have, the situation would be much worse. In other words, our plan is the right plan.”

The chancellor played down suggestions of a growing rift in the cabinet between ministers who want to extend tight social distancing guidelines and others who want them lifted to revive the economy.

“Right now, the single most important thing we can do for the health of our economy is to protect the health of our people,” he said.

“It is not a case of choosing between the economy and public health.

“Common sense tells us that doing so would be self-defeating.

“At a time when we are seeing hundreds of people dying every day from this terrible disease, the absolute priority must be to focus all of our resources – not just of the state but of businesses and all of you at home as well – in a collective national effort to beat this virus.”

Mr Sunak rejected suggestions that the UK would be feeling the financial cost of coronavirus for a generation to come, insisting that measures such as the government’s “furlough” scheme would allow the UK to “bounce back as quickly as possible”.

“This is going to be hard, our economy is going to take a significant hit and people are going to feel that in their jobs and in their household incomes,” he said.

But he added: “What I would say and what the OBR report confirms is that the measures we’ve put in place can significantly mitigate that impact.”

Liberal Democrat acting leader Ed Davey said too many people had been “left out” of Mr Sunak’s plans, including those who changed jobs in the weeks before the lockdown, many self-employed people and businesses which had found themselves unable to secure the loans he has announced.

“Our economy is falling off a cliff, but it seems the chancellor has no more help to offer,” said Davey.

“Facing the possibility of an economic downturn of historic proportions, the chancellor needed to be absolutely clear about planning for additional interventions to protect jobs and livelihoods as the crisis evolves. Instead the chancellor fell back on rhetoric about having the ‘right’ plan.”

Source: UK Politics - www.independent.co.uk