The chancellor of the exchequer just announced an additional £4.6b lockdown grant on Monday the 4th of January. I just thought to write how more government spending creates panic and anxiety for me. It’s not like I am curled into a ball waiting for the walls to cave in. It’s just that when I hear about any government spending, I have a moment of panic and anxiety.
Don’t get me wrong, the grant is a good thing. Many businesses have been devasted by the lockdowns since the start of the Coronavirus pandemic. There was a net decline of 6002 shops from the highstreet between January and July 2020 according to this BBC article. A lot of people are experiencing financial hardship at this time and it’s amazing to see government’s response to people’s hardship. It is a humane response and we should be extremely proud in the UK for that.
There have been support through the Furlough Scheme, Self-Employment Income Support Scheme, business loans and tax deferral schemes. Small business grants, the famous eat out to help out, Stamp Duty Land Tax Holiday, I could go on, the support package is extensive. The economy has been resilient given the circumstance but a lot of cash has been thrown at it.
Government’s Crisis Response
We are in a crisis, and like John Maynard Keynes said, “in the long run we are all dead”. There is so much in the latest spending review to unpack, plans for reinvesting in recovery. All in billions of pounds. The crucial thing is we are in a crisis and the government are in a crisis spending mode. The problem with being in crisis mode is there is so much focus on the short term. Like Keynes said we are all likely dead so it is important to focus on surviving. Getting a vaccine rolled out and administered is crucial to restarting the economy. Government spending is an important factor to surviving the current situation.
My main source of worry
Hwoever, in addition to the fall out from the pandemic, the UK has officially left the EU and “got BREXIT done”!. So the economic impact of the Coronavirus pandemic and the possible impact of BREXIT will take years to resolve. Whilst there are different people asking the government to do better, I am here thinking, “please don’t ask for more money”!. There are also questions about whether some of it was well spent. For instance, if the Stamp Duty Stamp Holiday really helped the less well off? and the huge contracts to companies for track and trace with little success. It would also seem some (very wealthy people) have done well out of this crisis. Cue Jeff Bezos and Elon Musk.
So far, the damage done by the fiscal response according the Office for Budget Responsibility’s Economic forecast will be £394 billion (19 per centof GDP), its highest level since 1944-45. The UK National debt is estimated to be £1.82b by March 2021 UK Public Spending website. This will bring the UK National debt over 100% of GDP against 80.7% of GDP in March 2020.
I really hope we conquer the virus and this crisis ends. The long road to recovery will be ahead of us but I worry and wonder!. When the time comes to clear the mess, guess who gets the bill? Probably not the likes of Bezos.