Prime Minister Boris Johnson vowed the UK will spend large sums on hospitals, schools and roads to jump-start the economy as it emerges from the coronavirus lockdown that has plunged the country into what may be the worst recession in three centuries.
In an interview in the Daily Mail, Johnson rejected a return to the austerity policies that followed the 2008 financial crisis and said the country will “build our way back” from the crisis through “shovel-ready” projects.
“The lesson is to act fast and we’re going to make sure that we have plans to help people whose old jobs are not there anymore to get the opportunities they need,” Johnson said. “We are absolutely not going back to the austerity of 10 years ago.”
Johnson is expected to unveil the spending plans in a major speech on Tuesday, while Chancellor Rishi Sunak is leading a new infrastructure task force to identify and speed up projects. The government pledge comes at a critical moment after the UK economy shrank a record 20.4% in April, effectively wiping out almost 18 years of growth in two months.
The crisis sparked an intense internal debate among Tories who for decades have stood for the free market, fiscal prudence and libertarianism, and are now on course to spend billions of pounds to rescue the economy.
In a separate interview with the Mirror newspaper, Johnson said children must return to school in September, raising the prospect that parents could be fined if they don’t comply. The prime minister criticised teachers opposed to returning, saying they must “take their responsibilities seriously,” according to the paper.
‘Bar for UK firm bailouts exceptionally high’
UK Chancellor of the Exchequer Rishi Sunak said he will set an “exceptionally high” bar for companies seeking taxpayer-funded bailouts during the coronavirus pandemic, days before the government sets out its plans to revive country’s economy.
“This is not my money,” Sunak told Bloomberg Television. “It’s not government’s money. This is taxpayers’ money. I shouldn’t be sitting here trying to pick winners.”
Sunak’s remarks are a warning to corporate giants that they will struggle to secure government funding and will instead have to turn to lenders, shareholders and new investors for help first. The government has come under pressure to bail out companies including Virgin Atlantic Airways Ltd., Tata Steel Ltd. and Jaguar Land Rover.
Sunak spoke to Bloomberg as he prepares to outline how he will reboot a country that has been plunged into a recession by a three-month lockdown. With much of economy set to reopen from July 4, the chancellor’s comments are a sign he is likely to hold off announcing any major fiscal measures until later in year.
Sunak said his main priority will be to protect jobs as Britain emerges from a lockdown that has left millions of workers dependent on government support. The best way to protect jobs, he said, will be to safely
re-open the economy.
“There are very tragic projections for what might happen to employment, there’s enormous dislocation in the labour market,” he said. “My priority absolutely is to try and protect and preserve as many of those jobs as possible.”
Sunak has had a baptism of fire since his surprise elevation to the post in February. As the coronavirus spread, the British economy shrank by a fifth in April, and jobless claims doubled to almost 3 million. After he announced a succession of measures previously unimaginable for a Conservative Chancellor, borrowing has soared, taking the national debt above the size of the country’s GDP for the first time since the 1960s.
Even so, Sunak said household finances appear to be in good shape, with people spending less during the past three months of lockdown.
“This is not a typical economic crisis where incomes are hugely impaired,” he said. “Because of the furlough scheme protecting incomes, and because we’ve essentially stopped people from going out, we’ve shut down large elements of discretionary consumer spend.”
Households added more than 30 billion pounds to their bank accounts during March and April, the most on record, according to the Bank of England. Meanwhile, consumers repaid an unprecedented 7.4 billion pounds of unsecured credit in April, the first full month of lockdown. That lays the ground for a sharp pick-up in spending and the housing market.