Fiscal watchdog tells Sunak to 'spray water' and worry later
The government's fiscal watchdog has given Chancellor Rishi Sunak the green light to spend heavily to help businesses faced with wipeout by the coronavirus pandemic.
With Sunak due to hold a news conference later on Tuesday officials from the Office for Budget Responsibility told MPs that the wartime conditions caused by the virus justified abandoning worries about the public finances.
Robert Chote, the OBR's chair, told the Treasury committee the government could not afford to be choosy when supporting businesses. "When the fire is large enough you just spray water and worry about it later," he said.
Referring to £12bn of measures announced by Sunak in his recent budget, Chote said: “One regards the £12bn as being a downpayment. The idea of what needs to be done and how expensive it needs to be is going to change on a daily basis. In some ways it’s like a wartime situation.”
Chote said the economy was "probably shrinking as we speak", damaging the public finances. He said during the second world war ran deficits of more than 20% for "five years on the trot and that was the right thing to do at that time".
Charlie Bean, a former Bank of England deputy governor, who is a member of the OBR and sits on its executive committee, told MPs it was better to spend too much than too little when faced with an economic meltdown.
“If you damage the economy, you damage the public finances further down the road," Bean said. "All the evidence we have from whether it’s the financial crisis or things like this, is that big early action is better than half-hearted action delayed.”
Businesses from airlines to pubs have called on the government to take direct action to prop up sectors most exposed to the virus. On Monday Prime Minister Boris Johnson told people to stop going to venues such as pubs, restaurants and theatres but did not order those businesses to close - a stance that has attracted industry criticism.
On Tuesday the boss of the Carluccios restaurant chain said it was days away from big closures without government help as branches stand empty.
Mark Jones said questions about whether businesses could claim on insurance without the government ordering them to close was a distraction. Insurance claims take a long time and hospitality operators are on the brink of collapse already, he said.
“We understand the role we have to play in public health, so I won’t question the government’s advice on that," Jones said. "But to do that to an industry without any fiscal support whatsoever condemns us to death, effectively.”
On Monday evening French President Emmanuel Macron announced up to €300bn of state guarantees for loans to French companies and pledged that no business would go bust because of the virus. That commitment dwarfed the measures Sunak announced in his first budget, though Sunak said he would "not hesitate to act" if things got worse.