U.K. Gets Green Light for ‘Wartime’ Stimulus in Virus Fight
U.K. Prime Minister Boris Johnson was given a free pass to spend whatever it takes to shore up the economy.
(Bloomberg) --
U.K. Prime Minister Boris Johnson was given a free pass to spend whatever it takes to shore up the economy as his government prepared an emergency package of support for businesses hit by the coronavirus pandemic.
Airlines, tourist attractions, restaurants, bars and theaters are among organizations with a bleak outlook after the prime minister announced radical curbs on public events, travel and social gatherings.
On Tuesday, Chancellor of the Exchequer Rishi Sunak will seek to deliver on his promise in last week’s budget to help companies and individuals facing ruin as a result of the virus crisis.
“Now is not a time to be squeamish about public sector debt,” Robert Chote, chairman of the Office for Budget Responsibility, the U.K.’s fiscal watchdog, told members of Parliament in London. “It is no abdication of budget responsibility to be spending what you need to spend to deal with this in the best way -- in some ways it’s like a wartime situation.”
It is less than a week since Sunak delivered his budget, the government’s major fiscal event, complete with a 30 billion pound stimulus package for the economy. The plan included 12 billion pounds of emergency measures specifically to help health care providers, businesses and individuals deal with the outbreak.
But Chote, who acts as a key adviser to the government on fiscal restraint, warned the rapidly spreading pandemic had already rendered those calculations out of date.
“There will be a time to think about what the appropriate medium term policy setting is for normal times to deal with the legacy of this,” Chote said. “But for the moment you’re dealing with the problem on a daily basis.”
During World War 2, the government ran budget deficits of more than 20% of GDP for five years in a row. “That was the right thing to do at that time,” Chote told Parliament’s Treasury committee.
Mel Stride, chairman of the committee and a member of Johnson’s Conservative Party, said it would be right for the government to break with its commitments to fiscal restraint to deal with the crisis.
“I think our message to the chancellor probably is that he needs to throw the kitchen sink at this one,” he said.
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