United Kingdom

Cost of government's coronavirus bailouts is now set to top £130billion

The cost of the government's coronavirus bailouts has been revised upwards to an eye-watering £130billion.  

The bill for interventions such as the furlough scheme and self-employed support is now expected to be £132.5billion, according to the independent watchdog.

The Office for Budget Responsibility (OBR) had estimated the costs on May 14 at £123.2billion.  

However, since then Chancellor Rishi Sunak announced an extension to the furlough scheme to the end of October, and a second grant for self-employed workers available from August.

The figures underline the challenge the government faces to keep the country going as the virus and ensuing lockdown causes the worst recession in 300 years. 

The bill for interventions such as the furlough scheme and self-employed support is now expected to be £132.5billion, according to the independent OBR watchdog

The OBR estimated last month that the government will borrow a total of £300billion this year, based on a scenario of a three-month lockdown followed by three months of restrictions easing. Public debt is already believed to have topped £2trillion - five years before it was forecast to at the Budget in March. 

The OBR said: 'The Government's economic policy response to the coronavirus crisis provides support for individuals and businesses through grants, loans and guarantees. This will have substantial direct budgetary costs.

'But the measures are designed specifically to support the economy through this temporary shock, and so they should help prevent greater economic and fiscal damage in the long term.'

It added that the new numbers have been calculated as more data and spending becomes available, but warns that further updates may be needed.

The OBR said it will focus its forecasts on the cash impacts from policies - for example the grants scheme for self-employed workers affected by the lockdown.

Longer-term costs to the economy will be factored in at a later date, the OBR said, adding: 'How the impacts are recorded in the public finances is a matter for the ONS (Office for National Statistics), and that is a further source of uncertainty until those classification decisions are made.

Breaking out some of the costing estimates, it said the furlough scheme bill is expected to increase by £4billion compared with last month's estimates.

The gross costs for the Government's Coronavirus Job Retention Scheme is cut from £63billion to £60billion, once the new arrangements are brought in from August which see employers contribute to furloughed staff bills.

But tax receipts from the scheme have been revised down, bringing a net cost to the Chancellor of £54billion versus £50billion in the previous estimates.

A final self-employment grant due to launch in August is also included, bringing the estimated total cost for the payments to £15billion, up from £10.5billion.

Other costs added include £100million for removing import duties on medical products and a further £100 million on for removing VAT on personal protective equipment (PPE).

Public debt is already believed to have topped £2trillion - five years before it was forecast to at the Budget in March

All other estimates were left unchanged from the May 14 update.

The OBR said: 'Given the pace at which the Treasury and other departments have developed these policies, we have not completed our standard iterative scrutiny processes to generate policy costings.

'Instead, the costs draw on the Treasury's published estimates for some measures and our own estimates for those that have not been costed.

'Where possible we have cross-checked our estimates against those presented by other organisations.'

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