Michael Gove hints at looming austerity after massive coronavirus bailouts

Michael Gove hinted at looming austerity today amid grim warnings of a 10 per cent hit to GDP and the jobless total hitting 2.75million 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, according to the Sunday Times. 

That suggests an extra 1.4million 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 3.3million last week.

The only faint glimmer of optimism in the forecasts is that growth could rebound strongly after the outbreak subsides, rather than the long period of stagnation after the credit crunch. 

Ministers have set aside a staggering £266billion warchest for the coronavirus battle this year – amid fears UK debt could hit £2trillion within 12 months.

The government has boosted its contingency fund for the next financial year from just £10billion to more than a quarter of a trillion pounds – equivalent to nearly half of central government spending, or more than 10 per cent of GDP.

The figure was set in emergency legislation passed with cross-party support last week, and was described as ‘extraordinary’ by economists.

Chancellor Rishi Sunak has announced a series of unprecedented – and open-ended – bailouts for millions of workers facing poverty as a result of coronavirus lockdown.

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. 

The Bank of England has cut rates twice to a record low of 0.1 per cent. Its quantitative easing scheme – effectively printing money to stimulate the economy – has been expanded to £645billion. 

But experts have warned that the government faces borrowing at least £200billion this year.

That would be enough to take UK net debt over the £2trillion mark, something that as recently as the Budget on March 11 was not expected to happen until 2025.   

Mr Sunak hinted that there will have to be tax rises in the future as he unveiled the latest rescue measures last week. 

And speaking on the BBC’s Andrew Marr show today, Mr Gove said stressed the package was ‘among the most generous in the world’.

‘That will increase the amount that we borrow but the Chancellor and the economic team at the Treasury are confident we can pay that off in due course,’ he said,

‘But ultimately, how do you put a price on life?’