The Pending Review: Fiscal Policy and Covid-19

Abstract

The Chancellor’s One Year Spending Review provides welcome and much-needed support for many sectors of the economy suffering their largest contraction in modern times.  The furlough and business bounce back loan schemes are good examples of how support has been provided but on a time-limited basis.  Unfortunately, the temporary nature of many of the plans announced seem unlikely to be able to address long-standing deficiencies in the economic performance of the UK, which have so sadly been exposed by the Covid crisis.  In this note we outline the magnitude of the economic shock, its implications for public debt and the strategy for its consolidation, the conundrum over public and private wages at a time of rising unemployment and the need for a new fiscal framework.