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Scars of Covid will 'last for a very long time', former Chancellor Ken Clarke tells LBC
7 February 2021, 11:49
Former Chancellor Ken Clarke has told LBC’s Swarbrick on Sunday he expects the economic scarring caused by Covid will “last for a very long time”.
Lord Clarke, who was chancellor from 1993 to 1997, said he believes “it will take a long time to get everything back on its feet again”, warning that the huge amounts of public debt would need to be paid off.
The intervention comes after the governor of the Bank of England said this week that they believe the Covid vaccine would help the economy make a rapid recovery in 2021.
Governor Andrew Bailey said their economists believe GDP will “recover strongly from the second quarter of 2021, towards pre-Covid levels”.
However, Mr Clarke told LBC’s Tom Swarbrick that while he “very much hopes” the governor’s projection is correct, “with great respect to the governor of the Bank of England - I don’t think he has got much more idea than me”.
The Conservative peer continued: “I don’t think anybody knows, because this is a quite unprecedented situation and there are very unprecedented features about the economic situation it has created.
“We will have a strong bounce back and some of the worst hit areas like restaurants and bars will find everyone is flocking into them, when we get rid of lockdown, and there will be a considerable recovery.
“But no, I think it will take a long time to get everything back on its feet again and there are all kinds of risks.”
Mr Clarke is calling for the government to take a proactive approach to tackling the high levels of public debt that have built up during the pandemic - including raising taxes.
“We are going to have to raise to pay for the colossal amount of public expenditure we have endeared and the colossal amount of debt, which the economy can’t just carry into the future,” he told LBC
Pressed by Tom on the Conservative’s election promise not to raise income tax, the former chancellor said: “I personally think it was a mistake to rule out the taxes which raise most of the government revenue and which are the fairest way of raising revenue.”
“99 percent were quite unaware that it was in this document - the Conservative manifesto - which is never distributed to the public on any wide scale,” he added.
“It is just silly to say the election manifesto stops you doing that. I would go to income tax, I would go to VAT myself, if I was still chancellor and say: ‘we did have that in the document, but everybody realises we wouldn’t have said that if we had the faintest idea what was going to hit us within a year or two of the election’.”
However, Mr Clarke said he would be “cautious” about raising business taxes at a point “when you are trying to get the economy to recover”.