UK and Scottish government modelling shows that the economic and fiscal costs of a Covid-19 epidemic could be on a par with the costs of the 2008 banking crisis.
According to a senior government source: ‘that is what our modelling shows’.
If millions were unable to work and significant numbers of businesses unable to trade – as usual during an epidemic – there would be a huge automatic rise in Universal Credit and other welfare payments to those quarantined.
Further costs would be incurred from whatever schemes are put in place to shelter otherwise viable businesses from collapse, coupled with any emergency top ups to health and social care spending.
City sources are calculating the economic hit as potentially five per cent of GDP or national income – which would be marginally less than the first-year impact of the banking collapses.
But the one-year impact on public finances could be as significant as in the year after the crash, because temporary rises in unemployment and under-employment could be sharper than 12 years ago, forcing up social security payments, while tax revenues would fall very fast.
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