Coronavirus: 'Tricky' to deliver new stimulus as pandemic spending climbs to £190bn

9 July 2020, 11:57 | Updated: 9 July 2020, 12:43

Chancellor Rishi Sunak faces a tricky task in spending new money earmarked to help the economy recover from the pandemic as the total taxpayer bill climbs to £190bn, a respected think-tank has said.

The Institute for Fiscal Studies (IFS) suggested rewards for employers to bring workers back after furlough - a government scheme that could cost up to £9bn - might even be wasted as most would probably have come back in any case.

It also said there were question marks over how much could be delivered by programmes to fund energy efficiency and jobs for young people.

In addition, the analysis cast doubt on whether the VAT cuts for the hospitality sector had come too early and if a stamp duty holiday until next March should last longer.

Underlying such concerns was the balancing act between preserving some of the economy as it is and accepting the transition to a "new normal" in the wake of the pandemic.

Separate analysis, by the Resolution Foundation, said that the chancellor's latest plan "risks falling short" of what is required.

It comes a day after Mr Sunak's £30bn "plan for jobs" designed to revive Britain's battered economy was unveiled alongside the disclosure of £33bn worth of public spending - including £15bn on personal protective equipment (PPE).

The plan is designed to protect jobs in sectors such as hospitality and to boost the housing market, but there have been complaints about a lack of targeted help for other badly hit parts of the economy such as retail and aviation.

IFS director Paul Johnson said the latest tranche of spending was unlike the initial £130bn outlay - which included the cost of subsidising the wages of temporarily laid-off workers and could be spent "quite easily".

"The second and subsequent acts are much trickier to deliver and get right," Mr Johnson said.

"They need to get the balance between preserving those parts of the economy which have a long-term future and helping the transition to a new normal.

"They also need to actually deliver goods and services and change"

"That is very different from simply disbursing cash."

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Torsten Bell, chief executive of the Resolution Foundation, said: "The scale of support offered - through Eat Out vouchers and the Job Retention Bonus - risks falling short of what will be required, while the likes of bricks and mortar retail have fallen through the cracks.

"By not going further the chancellor is taking quite a gamble on the strength of the recovery in the months ahead.

"Given the lasting impact of coronavirus on our economy, the chances are he will need to return to the House of Commons to announce more support in the autumn."