News | Published July 10 2020

Public spending on Covid-19 measures hits almost £190 billion, Treasury says

Figures released by the Treasury indicate that government spending on fighting the Covid-19 pandemic has reached almost £190 billion.

The new numbers for total Covid-19 expenditure were released after chancellor Rishi Sunak unveiled an additional £30 billion worth of measures in Parliament on Wednesday.

Reaction to the new measures has been mixed with some supportive of the chancellor’s move while there has been backlash from other sectors such as the aviation industry who claim to have been overlooked.

The chancellor said that direct spending on managing the crisis has hit £158.7 billion, without including the newest wave of measures announced on Wednesday.

Factoring in the latest measures, the total expenditure equates to almost £3,000 per person for every UK citizen, which exceeds the entire health budget projected for 2020-21.

The Office for Budget Responsibility estimated in June that the cost of managing the pandemic stood at £133 billion by that stage, meaning coronavirus costs have increased 40 per cent since then.

The Institute for Fiscal Studies [IFS] believes the additional spending measures unveiled this week will see the deficit rise above £300 billion. The government had forecast a deficit of £55 billion prior to the pandemic.

The new overall figure for public spending factors in £15 billion for PPE procurement and £10 billion toward the functional test and trace system.

Additional spending on health services alone overall has now reached £32 billion.

Among the total expenditures so far, £4.7 billion has been allocated to local government, £5.3 billion to public transport, and £4.1 billion for Scotland, Wales and Northern Ireland.

Another potentially expensive plan outlined by the chancellor was an incentive for firms to keep furloughed workers employed by paying them a £1,000 cash bonus for every individual furloughed that keeps their job beyond January 2021. Should every furloughed employee in the UK keep their job until then, the cost of the measure could reach £9.4 billion.

Speaking to the BBC, IFS director Paul Johnson said: "There is a huge public services additional spending that we didn't really know about that was announced [on Wednesday]. It was kind of skated over, but £15 billion for PPE for frontline workers is an enormous sum.”

Johnson added that Sunak’s strategy of spending money in the short-term to minimise long-term economic damage would cause more economic hardship overall.

Johnson continued: "I don't think the chancellor is desperately worried about the size of the deficit this year. What will concern him is the size of the deficit the year after, and the year after, and the year after that.”

Sunak used Wednesday’s statement to reiterate that the furlough scheme will be wound down as planned in October, a decision which has been criticised by aviation industry body Airlines UK.

With flights likely to be restricted in the winter months, the group says that more jobs will be lost in aviation on top of the tens of thousands of redundancies already confirmed if the government “continues to ignore” the sector.

Meanwhile, politicians in the city of Leicester have raised concerns over the local economy, after no commitments were made for any additional financial support for the area.

Business minister Nadhim Zahawi said in a letter to Leciester West MP and Labour shadow social care minister Liz Kendall that there were no plans for the government to change or extend existing schemes locally after it was forced to enter a localised lockdown due to a surge in coronavirus cases.

Kendall was angered by the news, saying: "I know it costs money and we all have to pay for it somehow but it will cost even more money if we don't keep our businesses open and we don't keep people in jobs.

“I think there's a moral issue here - if we are in lockdown for longer we need help for longer.”

A government spokesperson said that ministers will continue to assess “the circumstances of individual lockdowns” before taking “appropriate action”.

Leicester city mayor Sir Peter Soulsby said that he was "absolutely furious" that further assistance had not been provided, calling it a “brutal” lack of support.

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Authored by

Alexander Bridge-Wilkinson
Junior Editor
July 10 2020

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