The £30bn worth of policies and tax cuts put forward by the Chancellor of the Exchequer today will not be enough to keep the UK economy afloat, according to experts who predict a further spending spree in the autumn Budget.
In a summer statement delivered in the House of Commons this afternoon (July 8), Rishi Sunak announced a number of packages set to retain, support and create jobs to minimise unemployment in the aftermath of the coronavirus crisis.
Up to £9.4bn will be paid out to firms as a bonus for returning staff to full-time work while £3.7bn is set aside for supporting jobs through a Kickstart Scheme alongside trainee programmes and apprenticeships.
Tax cuts — a stamp duty holiday and reduced VAT in the tourism sector — will cost HM Treasury nearly £8bn, £500m will go towards a discount ‘eat out’ scheme and £8.7bn has been earmarked for an infrastructure package and greener homes.
But economists say the measures are unlikely to be enough to bolster the UK economy, predicting the focus will stay on getting the economy moving in the Budget in the autumn - when a further flurry of spending is likely to be revealed.
Paul Dales, chief UK economist at Capital Economics, said the method of paying for these measures was “unlikely to get any airtime” until the autumn, but said: “Even then, the chancellor is unlikely to embrace austerity anywhere near as tightly as after the global financial crash.
“So Mr Sunak’s spending spree will continue for some time yet and fiscal policy is unlikely to be a major drag on the economy in the coming years.”
Neil Birrell, chief investment officer at Premier Miton Investors, agreed. He said although the package was “positive”, it did not “go very far in the face of the economic situation we are in” and was “not significant in the overall scheme of things”.
According to Samuel Tombs, chief UK economist at Pantheon Macroeconomics, the measures were “not enough to underpin a V-shaped recovery”.
Mr Tombs said: “Despite the chancellor’s efforts, we still expect GDP to be about 5 per cent below its pre-Covid level by the end of this year.”
Further spending measures were also predicted by Tim Fassam, director of policy and government relations at Pimfa, who said there was a “sense” the chancellor had held back on announcing larger measures in case he needed to take action in the autumn Budget.
Who will foot the bill
Others were more focused on how — and when — the chancellor would decide to pay for the measures introduced today and previously for the UK’s buffer against the crisis.
The virus’ economic impact has resulted in the UK’s debt-to-GDP ratio breaking the 100 per cent mark for the first time since 1963 as the economy shrank a record 20 per cent in April, and government spending could now be in the region of £166bn.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Rishi Sunak may not have thrown the entire kitchen sink at the impending economic and jobs crisis, but he’s lobbed a fair amount of kitchenware at it.