Another recession seems inevitable: Former Chancellor NORMAN LAMONT argues that Britain cannot avoid the devastating financial impact of the latest coronavirus lockdown
My heart sank to my boots at the news this weekend that all of London and most of the south-east of England, as well as cities such as Portsmouth and Peterborough, were being plunged with almost immediate effect into the most draconian restriction tier yet.
Be under no illusions. For many tens of thousands of people who have struggled all year to remain solvent – be it in retail, the hospitality sector or as a small business – and for whom a busy Christmas and New Year offered a glimmer of hope, this is the final blow. Bankruptcy will be inevitable. It is an appalling prospect.
Of course, there can be no doubt that the Prime Minister was in an immensely tricky situation.
NORMAN LAMONT: For many tens of thousands of people who have struggled all year to remain solvent and for whom a busy Christmas and New Year offered a glimmer of hope, this is the final blow. Pictured deserted Regent street on Sunday
With Italy, France and other major European economies increasing Covid restrictions over Christmas and New Year, there was always going to be pressure to follow suit.
All the same, I do not envy Chancellor of the Exchequer Rishi Sunak. I know it is a lonely job and he is acquitting himself well, showing nerves of steel in this most difficult of times.
But as long as these new restrictions continue, the simple truth is that there is little the Chancellor can do to stimulate Britain’s economy.
For our recovery to begin in earnest, lockdown will have to be lifted entirely. Until that happens, tax cuts, consumer incentives and all the rest of the weapons in his arsenal are all as good as useless.
NORMAN LAMONT: As long as these new restrictions continue, the simple truth is that there is little the Chancellor can do to stimulate Britain’s economy. Pictured empty Debenhams the morning after Tier 4
He might as well try to make water run uphill. We know that the FTSE 100 has suffered its worst year since the economic crash of 2008.
Now it is inevitable that the fourth quarter of 2020, and probably the first of 2021, will also see negative growth – recession, in layman’s terms.
Until last week, I was hopeful for the New Year. There has been a rising tide of optimism boosted by the start of a vaccination programme – the first in the world – and a growing feeling of confidence that within a few months our economic misery could be behind us.
Certainly, many businesses were bullish about a rush of spending before Christmas.
Chancellor Rishi Sunak
Millions of people who’d been unable to splash out all year (and who are lucky enough to have retained their jobs) had savings that they were eager to splurge – we all felt we owed ourselves a treat.
Yet those hopes have now been smashed, not just in the UK but in Europe as well.
In fact, the situation is now so dire that holding out for a ‘V-shaped recovery’, as some were, now seems naive – the downward slope is almost vertical, the upward one ragged and shaky at best.
So many restaurants, pubs and shops had poured the last of their resources into obeying the rules on social distancing, with plastic partitions, wider aisles, protective equipment and so on.
NORMAN LAMONT: So many restaurants, pubs and shops had poured the last of their resources into obeying the rules on social distancing, with plastic partitions, wider aisles, protective equipment and so on. Pictured a pub staff waiting for customers
But the sudden imposition of Tier Four constrictions has rendered those plans futile, and wasted all that expense.
Meanwhile, the furlough scheme has been extended yet again, to the end of April, and there is no coherent plan to repay the tens of billions it is costing.
All the Chancellor has been able to do is keep signing the cheques. But is that really sustainable?
At the time of the next Budget, he must give some indication of how he plans to stabilise the nation’s finances.
Lord Lamont was Chancellor of the Exchequer from 1990-93
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