Boris Johnson Vows Big Spending, Rejects Economic Austerity

Prime Minister Boris Johnson vowed the U.K. will spend large sums on hospitals, schools and roads to jump-start the economy as it emerges from the coronavirus lockdown that has plunged the country into what may be the worst recession in three centuries.

In an interview in the Daily Mail, Johnson rejected a return to the austerity policies that followed the 2008 financial crisis and said the country will “build our way back” from the crisis through “shovel-ready” projects.

“The lesson is to act fast and we’re going to make sure that we have plans to help people whose old jobs are not there any more to get the opportunities they need,” Johnson said. “We are absolutely not going back to the austerity of 10 years ago.”

Johnson is expected to unveil the spending plans in a major speech on Tuesday, while Chancellor of the Exchequer Rishi Sunak is leading a new infrastructure task force to identify and speed up projects. The government pledge comes at a critical moment after the U.K. economy shrank a record 20.4% in April, effectively wiping out almost 18 years of growth in two months.

42,597 in U.S.Most new cases today

-10% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-1.​091 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

-2.​3% Global GDP Tracker (annualized), May

The crisis has sparked an intense internal debate among Tories who for decades have stood for the free market, fiscal prudence and libertarianism, and are now on course to spend well over 130 billion pounds to rescue the economy.

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The plans come as Britain braces for a surge in unemployment, with economists surveyed by Bloomberg expecting the jobless rate to hit 8% in the third quarter –- double its current level. That would see unemployment surge by about 1.4 million to more than 2.7 million, levels not seen since 1994.

The U.K.’s furlough program is due to run until the end of October, with firms taking on more of the huge 60 billion-pound ($74 billion) cost of the payouts from August. Speaking on Bloomberg TV on Friday, Sunak said the country cannot afford to continue the scheme “indefinitely,” but indicated there would be more targeted support for the worst-affected industries.

Former Labour Party leader Ed Miliband on Sunday called for the furlough program to be extended beyond October, saying the government was “pulling the rug” from under parts of the economy that are unable to reopen.

“The cost of not acting is greater than the cost of acting,” Miliband told the BBC’s “Andrew Marr Show.” “I fear Thatcher levels of unemployment,” a reference to the mass job losses under Prime Minister Margaret Thatcher that saw the number of people out at work peak at almost 3.3 million in 1984.

Labour has attacked the Conservatives for not scheduling a full Budget in the summer. Speaking on Sky TV’s “Sophy Ridge on Sunday,” Shadow Work and Pensions Secretary Jonathan Reynolds called for a focus on “jobs, jobs and jobs again,” including work guarantees for those unemployed for a significant period of time.

In a separate interview with the Mirror newspaper, Johnson said children must return to school in September, raising the prospect that parents could be fined if they don’t comply. The prime minister criticized teachers opposed to returning, saying they must “take their responsibilities seriously,” according to the paper.

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