Economist's instant reaction to government's £330 billion package announcement

17 March 2020, 18:21

By Fiona Jones

This is an economist's instant reaction to the government's £330 billion package announcement.

Chancellor Rishi Sunak announced there will be an "unprecedented" £330 billion package of government-backed loans to be made available to businesses by the end of this week. The Prime Minister said his government will do what "any wartime government" would do to protect the economy.

Economist Professor D'Maris Koffman said this announcement is without a doubt unprecedented £330 billion package, particularly the size of it and how they are taking "bold action."

"I think the key issue that people have raised here is how realistic is it that these loans will be paid back? And I think that what's probably coming down the line is a partial loan forgiveness.

"I don't think that package will end up performing in quite the way they anticipated ahead of time."

The PM has promised £330 billion package to support UK economy
The PM has promised £330 billion package to support UK economy. Picture: PA

Professor Koffman said that in terms of the second part of today's announcement, the loans to SMEs of up to £5 million which will be available from next week will "clearly help" - but he said there is nothing in place for the small proprietors, the sole traders or people who are in precarious part-time employment.

"Clearly this package is geared to calming markets, calming corporates. But in terms of the direct effects on our households the real mechanism they're looking at is trying to keep people in employment."

He said there will need to be definite steps taken to make sure households are not too stretched.

Mr Koffman pointed out that there is an income inequality which needs to be thought about it more detail; many young people in the capital have very little disposable income and people under 30 will could find "themselves in a bad place indeed" if they are unable to work in bars and restaurants for example.

Watch the full reaction above.