Footing the furlough scheme bill
Unprecedented levels of government support for individuals and businesses during the coronavirus pandemic means we will all need to foot the furlough scheme bill.
The size of that bill looks set to be significant.
According to the independent Office for Budget Responsibility, the tab has risen to an estimated £123.2bn.
The previous forecast from the OBR was £103.7bn, with the higher estimate largely due to the cost of furlough – or, to give it the proper name, the Coronavirus Jobs Retention Scheme.
The OBR estimates annual borrowing equivalent to 15.2% the size of the UK economy.
To place this in context, annual borrowing reached the equivalent of 22.1% of the size of the economy at the end of World War Two.
Of course, the British economy today is many times larger than it was back in 1945.
The government is forecast to borrow a total of £298bn this year. This forecast borrowing is £26bn higher than an earlier attempt to forecast borrowing costs around a month ago.
Furlough scheme bill drives up the cost
One factor driving up the cost of coping with the crisis is an extension to the furlough scheme, now available until the end of July on its current terms.
Depending on the details of funding the furlough scheme until the end of October, a further £20bn of borrowing could be required.
We expect to hear more about how employers will share the furlough costs with the government, later this month.
Other costs we could all eventually repay through higher taxes and public sector austerity include bad bank debt.
The government is backing loans to businesses, with some guaranteed at 80% and others, the recently launched bounce back loan scheme, at 100%.
If businesses are unable to repay these loans, the government, and ultimately the taxpayer, will be required to cover the costs.
The OBR has included £5bn in its calculations for unpaid loans to banks.
They have also earmarked £1bn for the cost of state welfare, including the rapidly rising cost of Universal Credit.