Leaked Treasury documents provide a stark warning on the future of the British economy

Leaked Treasury documents are today providing stark warnings on the future of the British economy. The document cites a body blow of up to £300billion to the British economy as a result of the enforced lockdown. As a result of this, the Chancellor Rishi Sunak  is facing making a monumental challenge in the coming months. 

Some have highlighted two courses of action at hand for the Chancellor. The first is to increase taxes, which is likely to cause anarchy inside the Tory party, the other is a further period  of cuts to public spending, which has become known as austerity. Questions arise regarding the wider public appetite for a further period of austerity.   

 Today, the day the British economy was opened up ever so slightly, news has broken that shows the UK economy has shrunk by 2% of GDP in the first quarter of 2020 and plunged 5.8 per cent in March, which is the largest monthly fall on record.

Technically, two quarters of negative growth constitute a recession and the Transport Secretary Grant Shapps has said this morning “Technically two quarters (of negative growth) would be required for a recession but nonetheless I think it is fairly clear that since most of the impact will be in the second quarter that we will be”. 

Only last week Boris Johnson  told MPs he had “no intention of returning to the A-word (austerity)” to get the economy going again. Unless a complete U-turn is performed massive tax, increases set to be the focus of the economic recovery plan. This is likely to cause significant dissatisfaction within the Tory party who favour low taxes ideologically. Given that there seems to be short shrift with the wider public for the kind of Tory austerity that took place from 2010, Boris Johnson may be left with no choice but to raise personal and corporation taxes significantly.  

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