Since the start of the coronavirus crisis, it has been clear that it will have a huge economic and fiscal impact.
It was right that the Government put public safety first by imposing the lockdown – and that it acted swiftly and decisively to support the economy. But both of these actions come at a heavy and continuing cost. The Office for Budget Responsibility recently predicted that the deficit for this coming year is likely to comfortably exceed any since the Second World War.
The Centre for Policy Studies, the leading centre-right think tank, has been working to estimate the ongoing cost of coronavirus to the Government’s finances, incorporating official data as well as estimates from the OBR, Institute for Fiscal Studies and others.
The CPS’s coronavirus counter, overseen by Caroline Elsom, a Senior Researcher at the think tank, suggests an estimated £127 billion in direct bailout costs and £119 billion in indirect costs such as lower tax revenue, based on the OBR scenario of a three-month lockdown followed by three months of looser restrictions.
When added to the £55 billion of borrowing already forecast for this financial year this produces a deficit of £301 billion, representing approximately 15% of GDP. This total figure is nearly double UK public expenditure on health, which came to £150 billion in 2017/18 and £153 billion 2018/19.
You can find full details of our calculations and methodology in the accompanying CPS briefing note. We will be revising and updating this in the light of new data, and welcome all suggestions.
Robert Colvile, Director of the Centre for Policy Studies, said: “The Government has acted throughout this crisis to save lives and protect livelihoods. But while it is clear to everyone that extraordinary times require extraordinary measures, they also incur extraordinary costs. It is vital to get the most accurate possible picture of the burden the Government is taking on in order to assess the full scale of the rebuilding that lies ahead.”
Caroline Elsom, Senior Researcher at the Centre for Policy Studies, said: “Counting the full cost of the coronavirus outbreak is vital to managing the ongoing crisis and planning future steps. As the economic impact becomes clearer, we will continue to track what this means for our public finances to help steer the country through to recovery.”