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A £15bn bill for PPE has helped to push the cost of the coronavirus outbreak to £190bn
Public spending on the battle against coronavirus has risen to nearly £190bn, according to figures released by the Treasury.
The total was reached after the chancellor announced a £30bn package to combat the crisis in his summer statement on Wednesday.
Reaction was mixed from business groups, with several backing Rishi Sunak’s priority of saving jobs.
But some industries in crisis such as aviation said they had been “ignored”.
And politicians in Leicester, where many businesses remain shut on government orders to control a local outbreak, responded angrily to the “brutal” lack of extra help for their city.
Direct spending on the crisis, excluding the latest measures, has risen to £158.7bn, Rishi Sunak revealed.
With the announcement of an additional £30bn, the total is nearly £3,000 for every person in the UK – and more than the entire planned health budget for 2020-21.
It means the cost of the crisis has risen by more than 40% since last month, when the government’s spending watchdog, the Office for Budget Responsibility, estimated it at £133bn.
This extra spending is likely to push the gap between what the government spends and what it raises in taxes – the deficit – above the OBR’s latest estimate of around £300bn, according to the influential Institute for Fiscal Studies think tank.
Before the coronavirus outbreak began, the government was expecting a deficit of £55bn.
‘Skated over’
The extra public spending figure includes £15bn to buy personal protective equipment such as gloves and masks.
It also includes £10bn for the testing and tracing of infected persons, taking the total extra spending on health services to £32bn.
“There is a huge public services additional spending that we didn’t really know about that was announced (on Wednesday). It was kind of skated over, but £15bn for PPE for frontline workers is an enormous sum,” Paul Johnson, director of the IFS, told the BBC.
He said the chancellor’s strategy is to spend money now, to minimise long-term damage to the economy, which would ultimately cause more harm overall.
“I don’t think the chancellor is desperately worried about the size of the deficit this year. What will concern him is the size of the deficit the year after, and the year after, and the year after that,” he said.
Politicians in Leicester said the local economy was facing severe damage, after the city was placed under the UK’s first local lockdown, with no date announced for its reopening.
The city’s mayor, Sir Peter Soulsby, told the BBC he was “absolutely furious” that expected help had not materialised, describing the lack of support as “brutal”.
Labour’s shadow social care minister Liz Kendall, who is MP for Leicester West, said people in the city had made “huge sacrifices” and were “desperate”.
“I know it costs money and we all have to pay for it somehow but it will cost even more money if we don’t keep our businesses open and we don’t keep people in jobs. So I think there’s a moral issue here – if we are in lockdown for longer we need help for longer,” she said.
There are some things no Chancellor can prepare for – such as what to do if your economy wipes out 18 years’ gains in two months of lockdown.
His solution was to temporarily deep freeze the economy, and pump money into crisis response. And the thawing process needs more funds, to prevent long term damage.
Now economists are talking about a deficit, a shortfall of way more than the £300bn previously expected. It’s equivalent to a bigger slice of the economy than at any time since the Second World War.
And it could get bigger; if more is needed to support the recovery – or in the event of a severe second wave.
But it’s a cost worth bearing if it carries the economy through a devastating crisis, safeguard the damage to output and jobs – and ensure taxes get paid.
For at some point, there will have to be a discussion about how we pay this back.
The government is currently borrowing record amounts on the financial markets to plug the gap – but that may not be enough. There may have to be tax hikes, possibly less generous rises in pensions.
But it may be a while until the economy is robust enough to bear that.
In a letter released by Ms Kendall, Business Minister Nadim Zahawi said there were “no plans” to extend any of the support schemes such as furlough and claimed the city council had spent only £500,000 of a £3.5m discretionary grant it had received from government.
A government spokesperson said that “the circumstances of individual lockdowns will continue to be carefully assessed before appropriate action is taken”.
Meanwhile, Airlines UK also criticised the decision not to extend the furlough scheme beyond October, saying flights were likely to continue to be restricted during the winter.
It would mean more jobs lost in addition to the tens of thousands of redundancies already announced “if the government continues to ignore aviation”, a spokesman for the trade body said.
Other large expenditures during the coronavirus crisis include £4.7bn for local government, £5.3bn for public transport, and £4.1bn for Scotland, Wales and Northern Ireland.
However, the impact of the coronavirus on the public finances remains highly uncertain.
Of the policy measures announced in the summer statement, the biggest was the plan to pay employers £1,000 for every furloughed worker they retain past January. The total bill could rise as high as £9.4bn, but only if every furloughed worker keeps their job.
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