Daily Covid-19 Brief: Thursday, May 14
Each day, our Public Policy team will be reporting on the latest news in the evolving situation. To view the previous day’s summary, please click here.
Office for Budget Responsibility (OBR) forecasted that Government measures to protect the economy during the Covid-19 crisis will cost £123bn for the current financial year
- The Office for Budget Responsibility’s previous estimate was £103.7bn. The increased cost of the Government’s furlough scheme is the main cause.
- It now expects annual borrowing to equal 15.2% of the UK economy. The highest since the 22.1% seen at the end of World War Two.
- The OBR estimated that a three-month lockdown, followed by a partial lifting for three months, would necessitate public sector borrowing of £298.4bn, a £25.5bn increase on the forecast from last month.
- Before the Covid-19 crisis took hold the OBR anticipated annual borrowing by the Government of £55bn.
- The OBR still estimates that the UK economy is likely to contract by 35% in the second quarter of 2020, before bouncing back quickly.
Governor of the Bank of England, Andrew Bailey signalled buying more Government debt to help it avoid a return to austerity
- Bailey said that one of the main purposes of the Bank buying £200bn of Government debt is to “spread the cost of this thing to society”.
- Bailey also signalled the Bank is likely to increase its new purchases of Government debt above the £200bn currently promised.
- Bailey said that one of the reasons the Bank is able to buy a larger stock of Government debt than during the 2008 financial crisis is because “the overall credibility of the framework remains in place, and the independence of the Bank is very important to that point”.
- The move by the Bank of England would mean the Government would be under no immediate pressure to pay back the debt and can avoid the need for austerity or significant tax rises in the aftermath of the Covid-19 crisis for some years.
- Normally such a measure would result in the devaluing of the pound and high inflation but the effect on the value of the pound this time is expected to be limited as most of the rest of the world is suffering from the same crisis.
- It comes as reports suggest that the chancellor, Rishi Sunak, is weighing up calls to double a monthly allowance to offset higher utility bills for people working from home as a result of the lockdown.
- Proposals include increasing the tax-free allowance from £26 per month to £50 per month and/or providing for full reimbursement of expenses incurred through a “gross-up” mechanism, where a worker receives more of their salary with fewer tax deductions.
Other UK COVID 19 news
- A test to find out whether people have been infected with Covid-19 in the past has been approved by Public Health England. Health minister Edward Argar, has said the Government intends to roll out the new antibody test to frontline workers first.
- The Scottish government has distributed 250,000 free food parcels to people in Scotland who are deemed to be most vulnerable to Covid-19 and who are shielding.
- London mayor Sadiq Khan has warned that the city’s Underground, bus and train services will have to be cut back unless the Government provides an emergency bailout. Khan said that Transport for London’s £2.1 billion cash reserve was “running out” as a result of massively reduced income from fares, advertising and the congestion charge on motorists. The Government has said discussions with the mayor are at “advanced stages.”
- Sir Mark Sedwill, the cabinet secretary and national security adviser to the Prime Minister has had Covid-19. He was ill around the time as the Prime Minister. But Sedwill continued working.
- The Scottish government has launched a new telephone and online service to help Scots in the midst of the “economic uncertainty” caused by Covid-19. The new services will be provided by Skills Development Scotland.
- The Government has announced a £2bn package to upgrade roads and railways. £1.7bn would be earmarked for local roads.
- Garden centres and recycling centres in Northern Ireland will reopen from next Monday as part of the first steps to ease lockdown.
World COVID 19 news
- Pakistan and India have signed agreements with a US pharmaceutical firm to expand supply of the drug remdesivir for treating Covid-19. The agreement between Gilead and five generic pharmaceutical companies in India and Pakistan will help make the medicine for 127 countries. Remdesivir has been proven to reduce the duration of symptoms.
- The French government has unveiled a €18bn (£15.9bn) rescue package for the country’s tourism industry. The French government also announced that citizens will be able to go holidays in France by July and August.
- The United Nations is forecasting that the pandemic will push an estimated 34.3 million people into extreme poverty, mostly in Africa.
- Taiwan has gone a whole month without recording any domestically transmitted cases. Overall it has registered just 440 cases and seven deaths.
- Another 2.98 million Americans sought unemployment benefits last week. The new applications brought the total number of unemployment claims since mid-March to 36.5 million. It means that one-in-four US workers are now on benefits.
- The European commission has suspended the delivery of 10 million face masks from China after two countries complained about the poor quality of the batches they received.
Private sector updates
- Minicab firms Addison Lee and Uber are to install partition screens in their taxis as data suggests cab drivers are one of the most at risk groups from Covid-19.
- Lloyd’s of London expects to pay out between £2.4bn and £3.5bn to its customers due to the lockdown, equivalent to the aftermath of 9/11 of major Hurricanes in the US. It said the insurance industry could lose a record £166bn globally this year due to claims related to the coronavirus pandemic as events and holidays are cancelled and companies go out of business.
- WH Smith has started to reopen more of stores. The firm reported a 91% drop in sales at its travel arm last month due to the slump in rail and air travel. The firm’s online business however reported a 400% increase in book sales in the past month.
- Qatar Airways plans to axe more than 9,000 jobs, a fifth of its workforce.
- The UK’s biggest mobile operator O2 is partnering with environmental charity Hubbub to encourage people to donate old or unused smartphones to help elderly and vulnerable “digitally disconnected” members of the community