Sunak's billions boost?

The chancellor of the exchequer plans to spend £350 billion

www.ifs.org.uk

Chancellor adds substantially to coronavirus measures, but he will need to come back with more -

Chancellor Rishi Sunak has announced more financial measures to address the impact of coronavirus on the economy.

IFS Director Paul Johnson said:

"The Chancellor has just added substantially to the package of measures announced just last week to support individuals and, in particular, businesses affected by the economic fall out from the Coronavirus. He will need to come back with more.

The biggest injection will come through guaranteed loans to businesses. These will be welcome. It is worth noting though that as loans that need to be paid back, the long term value and viability of businesses taking up the loans will be reduced.

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What impact will £350 billion have in tackling the coronavirus?

By Joe Harker

While the coronavirus has the potential to end lives, the disruption it causes is also highly likely to ruin them.

Many countries are going into lockdown to protect the public from the spread of the virus, but that is disastrous for businesses and workers as many are left without a source of income for an indefinite period of time.

Some of those countries have said they will look after businesses to avoid mass collapses, with the UK's chancellor of the exchequer announcing £350 billion in total of support. What impact will it have?

The Claim:

The money is split into two pots, the first is £330 billion worth of government guaranteed loans to keep businesses afloat if they need the money while there's £20 billion worth of other aid.

Rishi Sunak has said he will plough more money into the government's relief efforts if there was a need for it.

The money will help calm fears from various areas of the economy where businesses of all types and sizes were warning that they risked running out of money in the long-term.

The government doesn't want the country to get through the coronavirus and come out the other side with most of its businesses having collapsed and a broke population. Keeping employers afloat ought to protect jobs and keep people financially secure.

Prime minister Boris Johnson said the government had to do "whatever it takes" to keep the economy going, noting that jobs, incomes and businesses would be protected.

Businesses need to be subsidised during times when they aren't allowed to trade and incomes need to be protected so that people aren't left wondering whether they will even have any money coming in over the next few weeks.

The Counter Claim:

However, the Institute for Fiscal Studies warns that the chancellor will soon have to make good on his promise to increase his spending commitments.

They note that loans to businesses are "welcome" but warn all that borrowing will reduce the long term prospects of some businesses as they are saddled with a huge amount of debt which will need paying back.

The IFS also says the chancellor's support plans are "not well targeted at saving jobs" as labour costs will still be expensive and consumer demand is expected to plummet, meaning many businesses will still look to offload staff.

One of the suggested measures the government might want to think about is making it easier for people to shift over to jobs which the country will soon need far more of.

People who can't work because their employer has had to close could be trained as delivery drivers or warehouse staff during the coronavirus crisis and move back to their old occupations once things return to normal.

It'll take more than money to keep the economy going throughout the pandemic.

The Facts:

Sunak's measures have effectively overridden the budget he delivered last week, with financial commitments dwarfing those he previously made.

All firms in the hospitality sector will be given a holiday from business rates and small businesses can attempt to obtain grants of between £10,000 and £25,000.

The chancellor's spending is essentially treating the coronavirus like a wartime situation, though it also means the UK will rack up wartime deficits as a result.

While it is an expensive burden for the UK to bear the alternative would be far worse.

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