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The Chancellor has so far insisted despite the huge outgoings, he will still be able to return the country’s finances to a sustainable footing, at least in the medium-term. But the Treasury has warned emergency actions to fight the economic impact from the coronavirus crisis have already come at a “significant fiscal cost”. On Wednesday, Mr Sunak announced the Government’s latest financial package aimed at getting businesses back on track and protecting millions of jobs and employee salaries in the process as the UK comes out of lockdown.
The new Jobs Retention Bonus alone will cost the Government up to £9.4billion, with the cut in VAT adding a further £4.1billion.
The reduction in stamp duty for properties valued under £500,000 will cost £3.8billion, while the 50 percent eating out discount coming into force next month will add a further £500million.
This latest round of emergency measures are already in addition to the near-£160billion plan unveiled since the coronavirus outbreak in March.
The furlough scheme, which Mr Sunak has said will close in October, will cost the Treasury £60billion, according to the Office for Budget Responsibility (OBR).
The OBR had forecast borrowing for the entire year would come close to £300billion – before Mr Sunak announced the latest multi-billion-pound package on Wednesday.
But experts have warned UK taxpayers could be faced with huge economic pain in order to help get the country’s finances back in order.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, warned: “All of these measures will cost money – on top of the eye-watering sums already spent – and eventually, the Treasury is going to need to start raising revenue.
“It means that as early as the Autumn Budget we could see proposals and consultations emerge that promise more pain ahead.”
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “The Chancellor announced a ‘plan for jobs’ but it’s tomorrow’s taxpayers who will have to work hard to pay for it all.
“While the jobs retention bonus will help ensure that the furlough scheme isn’t just an expensive pause on mass lay-offs, taxpayers will be concerned about how and when they will pay the bills for ever-more spending promises.”
Carl Emmerson, deputy director at the Institute for Fiscal Studies (IFS) think tank, warned Britons could be hit with some tax rises to pay for the huge financial outgoings and crippling holes in the UK’s economy.
He said: “The Chancellor also said in his speech yesterday that over the medium term we must and we will put our public finances back on a sustainable footing.
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“Now what I think that means is that once we’re through the crisis phase, once the economy has established its new normal, we are probably going to find that the economy is not as big as what it would have been had the coronavirus never hit.
“If that’s the case, and it’s very likely to be the case, revenues will still be depressed, and if we want to try then to bring the deficit back to where it would have been absent the crisis we will need to do some spending cuts, or given a decade of austerity, perhaps more likely some tax rises.”
The Treasury has acknowledged the UK faces mammoth costs from the emergency recovery plans announced so far, but has so far insisted “the costs of failing to act to support public services, businesses, and workers would have been much higher”.
But the UK economy is forecast to collapse into its deepest recession in recent history as the coronavirus crisis and enforced nationwide lockdown blows a huge hole in the country’s finances.
Britain’s gross domestic product (GDP) plummeted by 25 percent during the first two months of the crisis, while the International Monetary Fund (IMF) has warned the country’s economy could shrink by more than 10 percent this year.
Mr Sunak has admitted he is “anxious” about the state of the UK’s economy which is “entering into a very significant recession” because of the coronavirus crisis, but has defended the £30billion of extra spending.
The Chancellor told Sky News on Thursday morning: “We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going.
“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. We have to rediscover behaviours that we’ve essentially unlearned over the last few months.
“But unless activity returns to normal, those jobs are at risk of going which is why we acted in the way that we did.”
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