Michael Burton 16 April 2020

Think-tank voices fears over gloomy fiscal outlook

Think-tank voices fears over gloomy fiscal outlook image

Recent forecasts by the official spending watchdog of a swift return to normality for the economy and the public finances after the coronavirus lockdown have been downplayed by a new think-tank study.

The Resolution Foundation in a report today (April 16) predicts the impact on the public finances of three scenarios in which the virus lockdown lasts three months, six months or 12 months.

A three month lockdown would push the deficit to a record 11% of GDP, higher than the peak of the financial crisis, a six-month period would push it to 21% of GDP and a 12-month lockdown would require the Government to borrow 38% of GDP in 2020, more than the UK has borrowed in any single year in its history.

The Office for Budget Responsibility (OBR) earlier this week forecast, based on a three month lockdown and then a three month partial lockdown, that the deficit would hit 14% of GDP this year at £273bn but then decline rapidly to the levels predicted in the March Budget of around 2%. The OBR said: ‘The net effect of the coronavirus impact and the policy response is likely to be a sharp (but largely temporary) increase in government borrowing.’

However the Resolution Foundation study says: ‘Our estimates of the possible scarring effect of coronavirus on the economy represent the biggest divergence with the OBR’s equivalent analysis. The OBR models an economy which returns to the pre-crisis GDP trend level by the end of 2020 while, even in our three-month scenario, the economy never reaches the pre-crisis trend.’

It foresees debt rising above 100% of GDP in all its three lockdown scenarios for the first time since the 1960s reaching 155% of GDP after a 12-month lockdown, the highest level since the 1950s.

The foundation’s study does state that if the lockdown lasts ‘only a few months’ the long-term impact will be less than that following previous recessions.

Participatory budgeting image

Participatory budgeting

Evgeny Barkov explains what participatory budgeting means and how it can reveal what citizens need.
SIGN UP
For your free daily news bulletin
Highways jobs

Principal Flood Risk Officer

Lancashire County Council
£42,683-£46,566
We have an exciting opportunity for a Principal Floor Risk Officer Lancashire
Recuriter: Lancashire County Council

Duke of Edinburgh Youth Support Worker

Essex County Council
£14597.0 - £19106.0 per month
Please note this is a part time contract - annualised hours 106 per year. Therefore the actual salary range is from £995.44 up to £1049.79 per annum. England, Essex, Harlow
Recuriter: Essex County Council

Head of Internal Audit

Kent County Council
Up to £97,000 + benefits
We now have an exciting opportunity to strengthen and shape our Audit function, as... Maidstone, Kent
Recuriter: Kent County Council

Director of Children’s Services

St. Helens Metropolitan Borough Council
circa £120,000
This is an exceptional opportunity for someone who wants to make a real difference to the children, young people and families of our Borough. St Helens, Merseyside
Recuriter: St. Helens Metropolitan Borough Council

Assistant Director, Social Care & Public Health Commissioning

Bolton Metropolitan Borough Council
c£71,000 to £89,000 per annum
Reporting to the Director of Strategic Commissioning you will lead Commissioning in the context of a developing Integrated Care System.  Bolton, Greater Manchester
Recuriter: Bolton Metropolitan Borough Council

Public Property

Latest issue - Public Property News

This issue of Public Property examines how how flexible workspaces can lead the way in regeneration for local authorities, Why local authority intervention is key to successful urban regeneration schemes and if the Government’s challenge of embracing beauty is an opportunity for communities.

The March issue also takes a closer look at Blackburn with Darwen Council's first digital health hub to help people gain control over health and care services.

Register for your free digital issue