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Gale's View

November 30th 2020


It may not feel like it if you are one of a projected 2.6 million people who have lost or are about to lose their jobs or are the hard-working proprietor of a small business that is on the edge of going bust but the International Monetary Fund has praised the United Kingdom`s response to the Covid 19 pandemic as `one of the best examples of coordinated action globally which has helped mitigate the damage, holding down unemployment and insolvencies`. 

With that glorious hindsight with which we are all equipped things could certainly have been done differently and sometimes better. We could, on both occasions, have locked down earlier, faster and harder and both lives and some jobs might have been saved had we done so.  Better and more transparent procurement of protective essentials might have saved money if at the expense of time and testing and tracing should have been given a greater and more effective priority much earlier in the pandemic.  It is also arguable that we relaxed too widely and too quickly during the summer but it is east to be wise after the event and there is also, as we are at present finding out the hard way, a limit to the amount of restriction that a peacetime population can and will tolerate. 

At the Despatch Box last week Rishi Sunak, the Chancellor of the Exchequer, spelled it out like it is and it is not a pretty picture. 

The pandemic is going to cost Britain £280 billion in the coming year on top of the billions already spent on business grants and the furlough scheme to protect jobs as well as the further billions spent on the Health Service.  The UK faces the largest fall in output in 300 years of recorded financial history and at a projected £394 billion of borrowing this year (19% of GDP) the highest level of borrowing in peacetime history.  Even by 2025 we shall be borrowing over £100 billion and of course sooner rather than later that money will have to be repaid. 

Nevertheless, the Chancellor still intends to spend more on the NHS, Schools, the recruitment of more nurses and police officers, and local authority care services as well as offering support to sport, the arts and charities. 

Although our unemployment is, on the most recent figures, lower than that in France, Italy, Spain, Canada and the United States it is still rising seriously in the private sector and I believe will top three million before it starts to fall again as, post-vaccine, businesses start to recover. It is against that whole economic backdrop that Rishi Sunak`s two most controversial decisions have been set. 

There is a huge number of people working in the public sector, in addition to NHS and Care staff, who have performed heroically during the pandemic and it would be wonderful if they could all receive financial recognition for their service.  Sadly, the present economic climate does not permit that. While, thanks to the austerity imposed in 2010, the nation`s finances had recovered sufficiently to ease us through the current crisis that bonus has been exhausted. The Chancellor is not in a position to grant an across-the-board pay increase to all public sector workers. 

A million Doctors, Nurses and others working in the NHS and care sectors will receive a pay rise as will the 2.1 million public sector workers earning below £24,000 a year. That means that the majority of public sector workers will in fact receive a pay increase next year. During the six months to September, however, while pay in the private sector fell by 1% and people were being furloughed, seeing wages and hours cut and losing jobs, public sector wages rose at the same time by 4% and job security has been maintained.  At a time when belts are tightening the Chancellor absolutely has to target resources to those who need it most. He is right, therefore, to impose a public sector pay freeze – and yes, that must mean a freeze upon MPs pay as well. 

Second, and more complex, is the matter of the 0.7% in overseas aid enshrined in law and pledged in the 2019 election. I wish to see that pledge honoured, particularly as the 0.7% will in real terms be worth a lot less next year than last as a result of the decline in our national income arising from the pandemic. The poorest nations in the World still need the assistance of some of the richest. It is also true that in an uncertain World the “soft power” and influence generated by our aid programme should not be under estimated: if we create a vacuum other more malign nations will be swift to fill it.

I do not share the populist, and apparently majority, view that we should cut our aid budget.  At the same time, we have to recognise the fact that over the years much money has been wasted propping up corrupt regimes while offering little of benefit to those who really need the help.  It is also the case that aid does not have to be offered in hard cash: for example, the hurricane-relief effort provided by the Royal Navy, of necessity all too frequently, comes at a considerable cost and there are many other quiet ways in which the UK provides assistance to developing countries. At the present time there needs to be a degree of common sense and flexibility about the manner in which we approach our aid budget. 

I would not wish the Chancellor`s job, in the current climate, upon an enemy but I believe that he has played a difficult hand very well. Whether he will be able to ride the perfect storm of pandemic debt and Brexit-generated turbulence and survive with his political reputation intact only time will tell.

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