The coronavirus crisis is having a “significant” impact on the UK economy, the chancellor has admitted, after a new report claimed Covid-19 is causing the worst economic shock in 100 years.
Rishi Sunak conceded the government “can’t protect every business and every household” and warned “these are tough times and there will be more to come”.
Acknowledging a report by the Office for Budget Responsibility, which said there could be a 35% hit to the economy between April and July, Mr Sunak said “those economic impacts are significant”.
But he said the government is “not just going to stand by and let this happen”, as he pointed to the OBR prediction that the economy should bounce back.
“We came into this crisis with a fundamentally sound economy, powered by the hard work and ingenuity of the British people and British businesses. So while those economic impacts are significant, the OBR also expects them to be temporary, with a bounce back in growth.”
He said the government’s response to the virus “aims to directly support people and businesses while restrictions are in place” so they can get “moving again” as soon as restrictions are lifted.
He said the OBR predicts the UK’s economic situation “would be much worse” had protective measures not been taken. “In other words, our plan is the right plan,” he added.
But he admitted mistakes were likely to have been made during the high pressure situation.
“When you are faced with such an unprecedented challenge, are we going to be absolutely perfect in every single thing we do, at the pace we are having to do it? Of course not,” he said. But they were doing “what we think is in the best interests of the country and people” and would be making improvements where necessary.
The main points from the OBR report:
National income – or GDP – falling by 35% in the second quarter of this year
Unemployment rising by 2 million to a rate of 10% (worse than in the banking crisis)
Public sector net borrowing to be £273bn or 14% of GDP this year (a multiple of its rise in the banking crisis)
Income tax revenues falling by £57 billion
VAT falling by £30 billion
All public sector receipts dropping by £130 billion
The Coronavirus job retention scheme (the furlough scheme) costing £42 billion
The self-employed income support scheme costing £10 billion
The small business grant scheme costing £15 billion
The business rates package costing £13 billion
All such government decisions collectively costing just under £100 billion
The chancellor gave the press conference as Boris Johnson recovers from coronavirus at his countryside mansion, Chequers, with his fiancée Carrie Symonds.
The Prime Minister’s official spokesman said: “The priority is for the PM to rest and recover and his medical team have advised him not to immediately return to work.”