But what the Chancellor announced in last month’s Winter Economy Plan was tailored for an economy genuinely recovering. New multi-tier lockdowns meant he needed to give ground – extending employers more support to avoid a huge redundancy spike
The headline 4.1pc unemployment rate is a huge underestimate. This official definition requires the jobless to be looking for work – which many haven’t been due to Covid and with countless job centres closed. Claimant count figures, along with PAYE data, point to unemployment already approaching 9-10pc.
Renewed lockdown meant Sunak had to act, returning to something closer to the original furlough scheme, with the state providing even more support.
But it’s not right to argue the Government can keep borrowing because, as so many economists put it hoping to end any discussion, “private investors are lending to the Government at ultra-low interest rates, so what is the problem?”
The problem is that gilt issuance on today’s massive scale is only possible because investors are only buying government bonds knowing the vast majority will then by bought by the Bank of England, using newly created money, on the secondary market.
This is almost the same as the central bank printing money to buy government debt directly – except, for now, we’re trying to make such a discredited practice look a bit less insane using a dash of financial engineering.
I had no problem with the Bank of England launching its QE programme in the aftermath of the global financial crisis – because it was announced as a £50bn programme to prevent a deeply damaging banking collapse and, contingent on that, would allow root-and-branch reforms to make our banking system less concentrated.
Ten years on, even before Covid, the UK’s QE programme had ballooned to £425bn – over eight times more than originally announced. Bloated stock and bonds markets became addicted to the QE drip-feed and still are.
Now, as government spending keeps rising, and the Bank buys ever more gilts, QE has spiked to £745bn. And “too-big-to-fail” remains a major problem.