ALEX BRUMMER: As Covid spending retreats, calls for new taxes, beyond those in Budget, should be resisted – that would keep boosters burning
- The dreadful state of the public finances and the coiled spring of economic activity are two sides of the same coin
- Had Rishi Sunak not bolstered the UK economy through Covid then the nation would have emerged from lockdown heading towards a 1930s-style recession
- The latest forward-looking data from the purchasing managers’ index, lively retail sales and CBI manufacturing data are all upbeat
The dreadful state of the public finances and the coiled spring of economic activity are two sides of the same coin.
Had Chancellor Rishi Sunak not dug deep to bolster the UK economy through Covid by supporting jobs and enterprise then the nation would have emerged from lockdown heading towards a 1930s-style recession.
The fiscal boost which lifted borrowing to £303billion in 2020-21, together with the Bank of England’s vast bond-buying programme mean that consumer and big business balance sheets are well stocked for expansion.
Support: Chancellor Rishi Sunak dug deep to bolster the UK economy through Covid by supporting jobs and enterprise
The latest forward-looking data from the purchasing managers’ index (PMI), lively retail sales and CBI manufacturing data are all upbeat. It signals the strongest rebound in UK private sector output since November 2013. There have been complaints about the pace of reopening. But the certainty provided by the roadmap, together with the Chancellor’s build-back tax break and pent-up consumer demand is driving recovery.
Not everything is going right. The virus catastrophe in India and Brazil and the mixed picture from the European Union will keep the brakes on the UK’s open economy when the domestic bounce runs its course. Nevertheless, the improving outlook in the jobs market (supported by furlough) has unleashed spending in pubs and released demand for real clothes, as opposed to joggers and pyjamas, as Primark reported in the last week.
Big consumer savings of £100billion-plus are not all going to be spent at once. The pandemic has engendered caution.
The services sector, which accounts for 70 per cent plus of national output, is raring to go. Consumer demand from hairdressing to frock shopping is sizzling. As critically, business services from IT to hospitality see light at the end of the tunnel.
There is no escaping the impact of Covid in the shape of a budget deficit at 14.5 per cent of national output or GDP – the highest peace time level. The pandemic is a battle against an unseen enemy and certainly in the UK in terms of deaths, hospital admissions and infections it is now possible to see an end.
But expensive government programmes, including testing, vaccines and income support, will have to remain in place if the virus is not to get out of hand again.
The costs are ferocious in the shape of national debt, which now stands at 97.7 per cent of GDP. And were interest rates to start rising it would hang around the neck of the Government like an anvil. Amid the fiscal gloom it is worth noting that even though chunks of the economy have been closed, hitting VAT, tax revenues were broadly stable at £65.1billion over the last year.
That suggests, as pandemic spending retreats in the coming months, the calls for swingeing new taxes, beyond those in last month’s Budget, should be resisted. That in itself would keep the boosters burning.
There are at least eight separate inquiries into the fallout from the collapse of Greensill Capital and the scandal triggered by David Cameron’s relentless lobbying.
An easy conclusion to reach from the email and texts to emerge so far is how blessed this country is with its public servants. Treasury officials and deputy governor of the Bank of England Sir Jon Cunliffe behaved in an exemplary manner in their firm rebuff of a former Prime Minister. That is an entirely different issue to the flaccid regulation of Greensill.
What is abundantly clear is that the affairs of Greensill and the GFG Alliance metals empire of Sanjeev Gupta were disastrously entwined. When Greensill collapsed Gupta’s empire was compromised and insolvency proceedings are under way.
Among allegations to emerge is that there was inter-company lending within Gupta’s empire and that it has used invoices, to raise supply chain cash from Greensill, from firms that are hard to trace.
The Business Department, which has responsibility for company law, is monitoring matters carefully. The case for a more intrusive and robust probe, while the document trial is fresh, is strong.
Three decades have passed since Britain’s jeweller-in-chief Gerald Ratner declared that the decanter and glasses on a silver tray in his stores was ‘total crap’.
The comment cost him his job and the family empire he built. ‘It seems like yesterday, I wish it was tomorrow. I would cancel it,’ he has tweeted.
The moment still haunts.