Top Treasury economist admits it made no ‘specific prediction or forecast’ on the effect of the second lockdown on businesses – as experts predict UK plc could bounce back to pre-pandemic levels in SIX MONTHS thanks to vaccine breakthrough
- Clare Lombardelli was questioned by MPs on Treasury Committee today
- Said team ‘haven’t looked at … predictions around specific restrictions’
- Sage meeting claimed she examined ‘economic impacts and associated harms’
- Economists voice hope recovery could be quicker than feared due to vaccine
- Bank of England suggested that UK plc will not reach 2019 levels until mid-2022
- Claims that now more likely to happen by middle of 2021 due to breakthrough
The Treasury failed to create any specific forecasts of the effect of the second lockdown on the UK economy, its chief economist admitted today.
Clare Lombardelli told MPs the finance ministry provided ministers with analysis before they decided on the four-week shutdown to December 2.
But she confirmed she and her team ‘haven’t looked at … the specific prediction or forecast around specific restrictions’.
She made the admission to the Treasury Committee this afternoon amid growing clamour for ministers to publish the economic costs of the lockdown as well as the medical risk of not doing it.
Tory MPs are gearing up to fight any attempt to extend it past December 2, arguing that it would do more damage than opening up the economy.
Committee chairman Mel Stride today asked Ms Lombardelli about minutes of a Sage meeting from September which suggested a specific impact assessment was being conducted by her.
She replied that the Treasury provided a ‘general picture of what is going on in the economy which we then use as part of our analysis’ which ties in with work carried out by the Bank of England, and Office for Budget Responsibility (OBR) among others.
‘I’m very aware that there are all these different strands to the kind of work that you are doing and of course the external stuff …but my question is a very specific one so I need to bring you back to these minutes,’ the Tory MP for Central Devon replied.
‘The minutes say: ”Policy makers will need to consider analysis if economic impacts and associated harms alongside this epidemiological assessment. This work is underway under the auspices of the chief economist”.
‘So very specifically on that work on economic impacts and associated harms of those proposed interventions, can you tell us specifically about that?
She replied: ‘As the Chancellor set out in Parliament last week, we haven’t done a specific prediction or forecast of the restrictions.
Clare Lombardelli told MPs she and her team ‘haven’t looked at … the specific prediction or forecast around specific restrictions’
The vaccine breakthrough sparked speculation from economists that the recovery could be quicker than feared – offering some relief for Chancellor Rishi Sunak (pictured yesterday) as he faces the task of stabilising the national finances
‘What we do do is ongoing policy that feeds into decisions ministers take which they consider alongside the health impacts the social impacts.’
Speaking after the evidence session, Mr Stide added:
Commenting on the evidence session, Rt Hon. Mel Stride MP, Chair of the Treasury Committee, said:
‘Clearly some sort of economic analysis of coronavirus interventions, including lockdown, has been conducted by HM Treasury.
‘It’s perplexing that this was not published ahead of last week’s vote on further lockdown measures.
‘MPs must have all the information possible available to them to allow them to carry out their duty of effectively scrutinising Government measures in the future.
‘HM Treasury’s analysis of interventions, as referred to by the Chief Economic Adviser in evidence to us, should, therefore, be made public.’
It came as economists have raised hopes UK plc could return to pre-pandemic levels within six months after the bombshell news about a vaccine.
A wave of optimism has been sweeping through scientists and ministers after Pfizer announced that early trials found its jabs were 90 per cent effective.
The government has said the UK – which already has 40million doses on order – could start vaccinating people before Christmas. Leading experts have suggested life could be ‘back to normal’ by Spring, as long as the government does not ‘screw up’ the rollout.
The breakthrough sparked speculation from economists that the recovery could be quicker than feared – offering some relief for Chancellor Rishi Sunak as he faces the task of stabilising the national finances.
The Bank of England gave a grim assessment only last week that UK plc would not return to its level from the end of last year until mid-2022.
The Bank of England said last week that its central expectation was that the economy will not regain its level from last year until the start of 2022
In its latest Monetary Policy report last week, the Bank predicted GDP to be 11 per cent lower this year in real terms
But Douglas McWilliams, of the Centre for Economics and Business Research, said GDP could get back to 2019 levels by ‘as early as mid-2021’.
He tweeted: ‘This would give a GDP growth rate next year that might be double digit or close to that.’
Paul Dales at Capital Economics and Simon French at Panmure Gordon brought their predictions for a recovery forward from the first half of 2023 to the beginning of 2022.
Capital Economics said unemployment was more likely to peak at 7 per cent next year, rather than the 9 per cent previously estimated.
The Bank of England pumped another £150billion into the economy as the blanket lockdown in England began last week.
The Bank increased its mammoth bond-buying programme to £895billion, warning that UK plc’s recovery was already ‘softening’ before the squeeze was announced on Saturday.
In the latest Monetary Policy report, the economy was projected to shrink by 2 per cent between October and December, but not to go into a double-dip recession – defined as two consecutive quarters of falling.
GDP was predicted to be 11 per cent lower this year in real terms, worse than the 9.5 per cent the Bank suggested in August.
The central expectation was that the economy would not regain its level from last year until the start of 2022.
The Office for National Statistics revealed earlier this year that public sector debt is now above £2 trillion for the first time ever
Analysts predicted earlier this month that the UK is facing a double dip recession because of the second lockdown
The MPC said unemployment was set to peak at 7.75 per cent in the second quarter of next year – with government bailouts pushing back the worst of the impact from the 7.5 per cent high the Bank had anticipated in this quarter.
The current rate is 4.8 per cent, suggesting hundreds of thousands more people face losing their jobs.
An eye-watering 5.5million are set to be on furlough this month, according to the report – with 2.5million still needing the support schemes until April.
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