Britain will not enjoy a “V-shaped bounce” out of the crisis caused by coronavirus but will take years to recover fully, two former chancellors today warned.
Speaking in interviews with the Evening Standard, former Treasury chiefs Kenneth Clarke and Norman Lamont said the pandemic would leave the country saddled with higher debt and permanent changes to employment instead of returning to normal.
“The next two or three years will be taken up with getting the economy back on its feet,” said Mr Clarke, who was Tory chancellor from 1993 to 1997. “I don’t expect a V-shaped bounce. Some sectors are going to be very badly damaged.
“A return to normality is going to take quite a considerable length of time, not least as well because it depends what the state of the global economy is.”
Mr Clarke said Boris Johnson was right to resist pressure to end the lockdown early because the daily number of Covid-19 cases was still too high.
“We need to get down to a much lower level of new cases and people entering hospital before you start any serious relaxation,” he said. adding: “Most members of the public don’t want the Government to give in to pressure too quickly.” Lord Lamont, who headed the Treasury from 1990 to 1993, said: “It’s an agonisingly difficult decision for the Prime Minister. I’m very conscious of the dangers to the economy. I don’t think there has been anything like this, in terms of the scale of what is likely to happen. We will get through it but it is enormously challenging.”
He warned: “There won’t be a V-shaped recovery. Some sectors may bounce back but it will take time and we will have an economy saddled with high debt.” He cautioned against tax rises to bring down the extra borrowing: “The Government will have to live with it for a while. It would be wrong to try to roll it back quickly.”
Lord Lamont said some changes would be permanent, including that some companies would “find they can operate with fewer people” and others would disappear. “The economy will be changed and there will be scars.”
He backed the Prime Minister for resisting Labour leader Sir Keir Starmer’s call to publish a plan to exit lockdown.
“The moment you announce a plan people want it to happen. It is worth hanging on a few more weeks just to drive the rate of infection further down and try to avoid a second resurgence.
“We are a few weeks behind the continent and they are only just beginning to ease restrictions there.”
Lord Lamont said a VAT cut might be needed to give people an incentive to start shopping and socialising again.
