The Daily Telegraph, though it has kicked out or forced out most of its real journalists and replaced them with Polly Fillers, bigots and golf club bores, does seem to have excellent access to confidential government documents. It is a mystery.
Here's an article based on one such document - a Treasury effort looking at Austerity Squared to pay for coronavirus largesse. Several interesting points here but one that does spring immediately to mind - many commentators have been asking if the stalwart, self-sacrificing work done by nurses, doctors, first responders etc might herald a new, kinder world - short answer is "no" as the Treasury contemplates a two year public sector pay freeze.
Anyway, here's the paywalled article:
A confidential Treasury assessment of the coronavirus crisis estimates that it will cost the Exchequer almost £300 billion this year and could require measures including an increase in income tax, the end of the triple lock on state pension increases and a two-year public sector pay freeze.
The Telegraph can reveal that a Treasury document drawn up for Rishi Sunak, the Chancellor, sets out a proposed "policy package" of tax increases and spending reductions which may have to be announced within weeks in order to "enhance credibility and boost investor confidence" in the British economy.
The document, dated May 5 and marked "Official - market sensitive", reveals that the "base case scenario" now forecasts that Britain will have a £337 billion budget deficit this year, compared to the forecast £55 billion in March's Budget.
It says tax rises and spending cuts which would raise between £25 billion and £30 billion - equivalent to a 5p increase in the basic rate of income tax - would be needed to fund the increased debt, and presents Mr Sunak with a menu of proposed measures to make up the shortfall.
In the worst case scenario - a so-called "L-shaped economic decline" - the figure would increase to a £516 billion deficit in the current financial year, rising to a cumulative £1.19 trillion over five years. This would require up to £90 billion in annual tax rises and/or spending cuts over the next few years.
Even the best-case V-shaped scenario, in which the economy falls sharply but recovers equally quickly - described as "optimistic" in the document - would lead to a £209 billion deficit this year.
The disclosure of the bleak economic predictions, which would suggest that Britain's finances are in their weakest state since the immediate aftermath of the Second World War, helps explain why the Government is now urging people to return to work where possible.
On Sunday evening, Boris Johnson set out the country's strategy for beginning to exit the lockdown but was criticised by trade unions and opposition MPs for apparently rushing the return to work.
The Treasury document warns ministers that, if Britain's economy does not recover soon, the country could be thrown into a 1976-style "sovereign debt crisis", a situation that led to an international bailout.
On Tuesday, the Chancellor announced that the furlough scheme to subsidise wages would be extended until October but that employers would have to pick up more of the bill from the end of July.
The scheme is now estimated to cost £100 billion, with almost 10 million workers now either paid by the Government-funded initiative or by universal credit.
Mr Sunak is advised that, to "stabilise debts" in the base case scenario, he will have to increase taxes or cut spending to raise between £25 billion and £30 billion a year.
In the worst case scenario, he will have to raise £80 billion to £90 billion a year. He is advised that an announcement on how to fund the huge increase in spending may have to be made imminently, but that the tax and spend changes could be delayed to avoid derailing an economic recovery.
The document says the Chancellor "has indicated a preference for accepting a higher but broadly stable level of debt" after the crisis. However, it adds: "As debt is likely to reach significantly higher levels after the crisis, it will be important to stabilise the debt-to-GDP ratio and prevent debt from continuing to grow on an unsustainable trajectory."
The document advises Mr Sunak that it is now likely to become necessary to break at least one of the Conservatives' key manifesto pledges not to increase taxes or scrap the triple lock on state pension rises.
It states: "To fill a gap this size [in the public finances] through tax revenue risers would be very challenging without breaking the tax lock. To raise fiscally significant amounts, we would either have to increase rates/thresholds in one of the broad-based taxes (IT, NICS, VAT, CT) or reform one of the biggest tax reliefs (eg pensions tax)."
It adds that it would be "economically better to break the tax lock to achieve revenue of this scale than attempt to raise this level of revenue" and would also be "important to consider measures that support a growth-friendly composition of tax (consumption/property taxes rather than taxes on income/profits).
"We should also look at opportunities for new taxes that could meet some of the Government's broader policy objectives, raising revenue to relieve long-term fiscal pressures (eg an NHS/social care surcharge or new carbon/green taxes). A 1 per cent increase in the basic rate in the basic rate of income tax would raise around £5 billion p.a."
Mr Sunak is also advised that there are "further options to address the challenge through spending and welfare" reductions.
The document suggests a two-year freeze on public sector pay could generate savings of £6.5 billion by 2023-24 while "stopping the rising cost" of the pension triple lock would produce savings of £8 billion a year.
Officials have also been asked to provide advice on the timing of an announcement, which could take the form of a summer Budget. The document advises the Chancellor that the "timing, pace and composition of any consolidation should be managed carefully to avoid the risk of stifling the economic recovery".
However, it adds: "The timing of an effective medium-term strategy should also take into the account the right time to use political capital, and there may be benefits to setting out future consolidation plans now alongside support for the recovery."
The document, drawn up by the Chancellor's policy advisers, says "a more realistic scenario" than the idea of a V-shaped recovery is a "prolonged recovery and some permanent damage to the economy" - in other words, a U-shaped recovery.
In the Treasury's own worst case prediction, the economy would go through an "L-shaped" recovery, meaning economic output would remain below current forecasts for the next five years, leading to a large structural deficit and a budget deficit running to one third of GDP.
Mr Sunak has faced repeated questions about how he intends to recoup the cost of the coronavirus bailout package, but has so far refused to be drawn into discussions about future tax rises or squeezes on public spending.
A Treasury source described the measures set out in the document as "a summary of all the existing levers" rather than a recommendation of any particular course of action, and said no decisions had yet been made about revenue-raising policies.
The document reveals that the Treasury's own base case scenario - in other words, what it thinks is most likely - estimates that the current budget deficit, forecast at £55 billion for 2020-21 before the pandemic, will actually be £337 billion because of the cost of bailouts and lost tax revenues. The base case puts the deficit at £83 billion in 2021-22, dropping to £32 billion by 2024-25.
In a worst case scenario it will be £516 billion, or £450 billion more than pre-pandemic forecasts. That dwarfs the budget for NHS England, which stands at £129 billion.
The most optimistic scenario given by Treasury advisers is that the deficit will run to £209 billion in the current financial year and could even return to surplus by 2023-24.
A Treasury spokesman said: "The Government's focus is on supporting families and businesses through this difficult period. That's why we announced >an extension to the furlough scheme, which has already saved millions of jobs, earlier."
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