The Government’s response to the coronavirus pandemic has lead to decreasing economic activity in the UK. Prime Minister Boris Johnson announced Britain would essentially go into lockdown for the foreseeable future, urging people to stay home if possible to stop the spread of COVID-19.
Before the impact of the pandemic, the Office for Budget Responsibility forecast borrowing to be £55 billion, or 2.4 percent of national income in the coming financial year.
However, the Government has since unveiled a multi-billion pound scheme for Britons.
The scheme has introduced measures to cover the self-employed, on top of the coronavirus job retention scheme for workers, cash handouts for small businesses, tax holidays and extra welfare payments.
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The Government will cover employer National Insurance and pension contributions of furloughed workers and 80 percent of people’s salary, subject to a cap of £2,500 a month.
Chancellor of the Exchequer Rishi Sunak said last week: “Since the start of the coronavirus outbreak, I’ve made it clear that hard-working employers and employees should not have to suffer hardship unnecessarily.
“Our Coronavirus Job Retention Scheme supports workers and businesses up and down the UK – and today we’re strengthening it because we will do whatever it takes to support jobs.”
The full scale of both the economic impact of the COVID-19 pandemic and the policy response to it will only become clear over time.
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Government coronavirus spending: The Government has urged people to stay home, meaning many can’t work (Image: GETTY)
Government coronavirus spending: Rishi Sunak announced his measures to help employees struggling due to the coronavirus (Image: GETTY)
According to the Institute for Fiscal Studies (IFS), the changes in the public finance landscape the outbreak has brought about “will remain with us long after the immediate crisis has passed”.
IFS warned: “By the end of 2020–21, we will have much-elevated Government debt.
“Hopefully the COVID-19 outbreak will be behind us, but the tax and spend trade-offs facing policy makers will be made more stark for years, and more likely for decades, as they strive to bring debt back down over the longer-term.”
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Government spending can be financed either by borrowing, or taxes.
In this case, the Government has increased its borrowing to reduce any long-term scarring effects in the economy.
Express.co.uk spoke to personal finance expert and channel director at moneyguru.com, Deborah Vickers, about where to Government has found the money to fund the nation through the coronavirus crisis.
She said: “We’re all thinking the same, and even casting our minds back a couple of weeks ago to The Budget, this was a huge question. Where is all of this money coming from?
“The Government will pay for all of this aid by borrowing.
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“It will essentially issue more debt to the financial markets, and the market will buy the new debt issued by the Government.
“The Bank of England could also print money and buy the Government new debt.”
She added: “The Government has now announced how it’ll aid almost everyone, from businesses, to the employed and self-employed, to households across the UK.
“This is all on top of its own expense which will still continue.
“The Government are already in debt, and now they’re borrowing billions more.
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“It’s concerning as a nation as we’re all wondering, how will it be paid back?
“The ‘borrowing’ to aid the nation is for the foreseeable, nobody know how long this will all go on for – not even the Government. This will likely be long term.
“By the end of 2020, we will have racked up a big Government debt.
“Hopefully the COVID-19 outbreak will be behind us, but going forward the tax and spend trade-offs facing us will be made more clear as we strive to bring debt back down.”