The fiscal and monetary actions taken around the globe to tackle the COVID pandemic and protect the economy are eye-watering: equivalent according the IMF of around 8 trillion US dollars. They include higher spending and foregone revenue, public sector loans and equity injections, and guarantees. The UK’s package alone is worth in excess of 15% of its GDP.
The current attitude of governments and central bankers is understandably – ‘whatever it takes’ – but a time will come when this will all have to be paid for.
Already, economists around the global are predicting a decline in global output to dwarf the great depression so the options are limited: higher taxes, great borrowing, monetisation. Each carries its own risks and flaws. And Britain’s ability to act will also be constrained by the pace of recovery and strategies adopted elsewhere.
At the same time, the crisis offers a unique opportunity to reform and restructure our economy to make it fairer, greener and more sustainable and address structural problems which previously looked insurmountable. What do we spend, when and how? How do we avoid a return to ‘business as usual’? And what might as brave new world look like?