Rishi Sunak, the British Chancellor of the Exchequer, has warned that “economy is going to take a significant hit” and if the current forecasts are to be relied the economy could shrink by 13 percent in 2020. What that means is that the UK is expected to produce 13 percent fewer goods and services than it did last year. He said that the government was "grappling with something that is unprecedented" and that it was "a very difficult and uncertain time". The coronavirus lockdown measures pushed the country officially into recession.

Nevertheless some senior Conservative leaders along with the Labour leaders hold the view that it was inept handling of the crisis by the Prime Minister, Boris Johnson that pushed the country to this stage. Shadow chancellor Anneliese Dodds blamed Prime Minister Boris Johnson for the scale of the economic decline, saying: "A downturn was inevitable after lockdown - but Johnson's jobs crisis wasn't."

Though the government has been trying to put a brave face and the Office for National Statistics (ONS) claimed that the economy bounced back in June as government restrictions on movement started to ease-- the economy grew by 8.7 per cent in June, after growth of 1.8 per cent in May—officials like Jonathan Athow, deputy national statistician for economic statistics, hold: "Despite this, gross domestic product (GDP) in June still remains a sixth below its level in February, before the virus struck."

The other thing that is going to change significantly is the government deficit. This is the gap between the amount of money the government ‘earns’ (from tax, mostly) and the amount it spends. Last March, the UK government had a surplus of £19 billion (i.e. it earnt more than it spent). For long Jeremy Corbyn has been criticising the government for resorting to unnecessary austerity. But the successive Conservative government did not pay proper attention to it.

However forced by the situation, precisely to combat coronavirus and the economic effects of lockdown, the government has announced big spending plans, such as building new hospitals and subsidising the wages of furloughed workers. At the same time, the amount of tax it collects is going to go down, because closed-down businesses aren’t making any taxable profit and laid-off workers aren’t making any taxable income. This is predicted to result in a deficit of £273 billion in the 2020/21 financial year.

Soon availability of jobs is going to be major issue. With British companies doing less business, jobs in those industries will be lost. The unemployment rate (which only counts people looking for work and not people like students or stay-at-home parents) is expected to double over the next three months, from 5 to 10 percent. While some economists think that the size of the economy isn't a good way to measure its health or wellbeing in general, pretty much everyone agrees that an unplanned recession like this will be bad for both.

The government is all set to review its deficit policy. Government deficit was often cited as a concern following the 2008 recession. Indeed, the main reason given for the government’s austerity policies (cuts to public spending) over the last decade was to reduce the deficit. The successive governments which was why refused to entertain the plea of Jeremy to substantially reduce the austerity measures.

The argument was that unless Britain started “living within its means” then taxpayer money would be wasted on interest payments for debt rather than being spent on useful things like schools and hospitals. The present crisis has also given rise to a debate that government should seriously think of spending tax money on development. It was spending a huge amount on social measures.

People are now wondering how the government will respond to a deficit that is almost three times bigger. More austerity? Less? Something completely different? Last round of austerity has shifted the public mood. Even before the pandemic and associated threat of recession, two-thirds of voters said that cuts had gone “too far”. Many economists and other experts have come out to criticise the last decade of austerity for making almost everybody poorer.

The Conservative Party won the 2019 election promising an extra £34 billion a year of public spending. It appears that the government will receive more support if it responds to this recession by opening the spending taps rather than tightening them. It is argued that for Aristotle, the term “economy” referred to household management and what a household needed to lead a good life.

Britain’s recession is deeper than those recorded by comparable economies in Europe, notably Germany, France and Italy, or that of the US. The other Group of Seven economies, Japan and Canada, have yet to post second-quarter numbers but no economist thinks they will be as bad as the UK’s. The UK has the highest official coronavirus-related death toll in Europe with 46,611 deaths. The actual death toll is believed to be higher as the official dataset only incorporates those who have tested positive for Covid-19.

Labour’s shadow chancellor Anneliese Dodds blamed the government for failing to take enough action to prevent mass unemployment. “A downturn was inevitable after lockdown. We’ve already got the worst excess death rate in Europe, now we’re on course for the worst recession too. That’s a tragedy for our country and it’s happening on the PM’s watch.”
(IPA Service)