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Chancellor urged to spend another £100bn driving COVID recovery

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·Senior City Correspondent, Yahoo Finance UK
·3-min read
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UK Chancellor Rishi Sunak. Photo: HM Treasury/Flickr
UK Chancellor Rishi Sunak. Photo: HM Treasury/Flickr

The chancellor is being urged to spend £100bn ($142bn) on driving the UK's economic bounce back from COVID-19.

The Resolution Foundation, one of Britain's most influential think tanks, on Thursday said the government should announce spending measures worth £100bn at next week's budget.

The Resolution Foundation said the chancellor should extend COVID-19 support measures until the end of lockdown at a cost of £30bn. The think tank also called for another £70bn in stimulus spending to help drive a recovery once the economy is fully unlocked.

READ MORE: UK government won't 'pull the rug out,' PM promises businesses

"The chancellor is approaching his second budget at a pivotal moment for the economy, with the country likely to emerge out of the biggest economic downturn in over three centuries in the coming months," said James Smith, research director at the Resolution Foundation.

“While in the US debate has focused on President Biden’s £1.9tn stimulus plan, the UK debate has got stuck on how to withdraw support. Instead, the chancellor should combine extending existing support with fresh stimulus once restrictions are lifted to deliver a £100bn plan to boost Britain’s recovery."

Specific suggestions include a £27bn skills retraining programme to address unemployment, a £9bn voucher scheme for high streets, and a £18bn green investment scheme. The organisation also called on the chancellor to make permanent the temporary £20 uplift for universal credit.

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The suggested stimulus package would total 5% of UK GDP but Smith said it was warranted.

“That is the scale of ambition needed to increase the chances that Britain sees a strong recovery from its pandemic-induced slump, and to ensure the recovery reaches firms and families across the UK,” he said.

Chancellor Rishi Sunak is due to deliver his annual budget next week on 3 March. The chancellor has already promised an update of his "Plan for Jobs" and is due to announce the fourth grant for the self-employed. The prime minister has said the government will continue to stand by businesses during the phased reopening of the economy, suggesting schemes like Bounce Back loans and furlough could be extended until June.

The cost of these schemes has put the government on track to borrow over £380bn this financial year and Sunak is keen to return UK finances to a more sustainable footing as soon as possible. The chancellor is said to be considering announcing tax rises in the budget, including an increase to corporation tax.

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The Resolution Foundation said Sunak should hold off on tax rises for now and instead wait until an economic recovery had taken root.

In separate budget submissions, industry groups TechUK and TheCityUK urged the government to commit more to digital investment to help underpin Britain's economic bounce back.

"The UK’s future lies in being a highly-skilled, competitive, innovative and green economy," said Emma Reynolds, managing director for public Affairs, policy and research at TheCityUK. "In this sustainable vision, people will be our greatest asset, and digital infrastructure our most important tool."

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