UK must spend - OBR17 Mar 2020 10:35
https://www.theguardian.com/business/live/2020/mar/17/markets-covid-19-ftse-government-rescue-packages-airlines-pubs-compass-airbus-business-live
The head of the government’s tax and spending watchdog has warned that Britain is facing a “wartime situation” that requires a mass expansion in government spending to support businesses through the worst of the coronavirus outbreak.
Robert Chote, the head of the Office for Budget Responsibility, says the economy is “probably shrinking as we speak” with damaging consequences for the public purse.
Now, though, is the time to dramatically ramp up support for households and firms, Chote insists.
Speaking to MPs on the Treasury committee to discuss last week’s budget (which included a £12bn package of emergency coronavirus support), he says: “The situation has moved on even in the few days since the budget announcement.”
Chote says the UK must spend a lot more:
“One regards the £12bn as being a downpayment. The idea of what needs to be done and how expensive it needs to be is going to change on a daily basis. In some ways it’s like a wartime situation.”
Charlie Bean, a former deputy governor of the Bank of England who sits on the government’s budget responsibility committee and is also appearing before the Treasury committee, says:
“It’s better to end up spending a little too much here than not doing enough.”
“If you damage the economy, you damage the public finances further down the road. All the evidence we have from whether it’s the financial crisis or things like this, is that big early action is better than half-hearted action delayed.”
OBR chief Robert Chote went on to warn MPs that some businesses will ‘inevitably’ not survive the coronavirus pandemic.
This is no time to be squeamish about public debt, he insists - indeed, a large, temporary increased in borrowing makes sense.
He reminds the Treasury committee that the UK budget deficit hit 20% of GDP in the second world war (it was just 1.9% last year).
Chote also singles out gig economy workers - saying its crucial to make up their earnings in some way.
When the fire is large enough, you just spray water (or in this case money), Chote insists firmly. The mopping-up operation can wait!
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