Michael Gove hinted at looming austerity today amid grim warnings of a 10 per cent hit to GDP and the jobless total hitting 2.75 million by June.
THE Cabinet minister said it was right to put the UK into lockdown to limit the spread of the disease, even though it meant spiralling UK debt, as you cannot ‘put a price on lives.’
But he said the massive hole left in the country’s finances by rescue packages for workers and businesses will need to be paid off ‘in due course.’
The tough message came as forecasters said the impact on UK plc from coronavirus will be many times greater than from the credit crunch.
Investment firm Nomura expects an unemployment rate of 8 per cent in the next quarter, up from just 3.9 per cent in January.
That will spark a huge increase in the cost of benefits for the government, putting the finances under more pressure.
That suggests an extra 1.4 million people out of work, with the total reaching 2.75 million.
It predicts GDP will plummet by 13.5 per cent in the second quarter of the year, more than six times the biggest quarterly fall during the financial crisis.
Other economies face similar misery, after US unemployment claims soared from 282,000 to 3.3 million last week.
Ministers have set aside a staggering £266 billion war chest for the Covid-19 battle this year – amid fears UK debt could hit £2 trillion within 12 months.
Self-employed workers will be able to get 80 per cent of their previous income covered by the government, up to a limit of £2,500 a month – although only those with trading profits below £50,000 will be eligible.
The government is also covering 80 per cent of wages for companies to keep workers on. It will pay up to £2,500 a month – equivalent to the UK average wage of £30,000 a year.
But experts have warned that the government faces borrowing at least £200 billion this year.
That would be enough to take UK net debt over the £2 trillion mark, something that as recently as the Budget on March 11 was not expected to happen until 2025.