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MINISTERS must take urgent action to tackle unemployment if Britain is to avoid a post-coronavirus financial disaster, the Trades Union Congress (TUC) urged today.
A sharp rise in unemployment is the “biggest danger” Britain’s economy faces, the TUC warned, as it called on the government to stop millions of job losses.
The trade union body said that high levels of unemployment at, or higher than, the rate seen in the Thatcher era would stretch government funds to an “unprecedented peacetime rise in borrowing,” at a predicted sum of £322 billion this year.
This would be mainly driven by the loss of income tax and National Insurance contributions that comes with higher unemployment, the TUC said.
The Office for Budget Responsibility (OBR) warned today that, in a worst-case scenario, the economy would not recover from the Covid-19 crisis until 2024.
The fiscal watchdog said that Britain is on track for the largest decline in annual GDP for 300 years, warning that the economy could shrink by as much as 14.3 per cent this year.
Unemployment in this scenario would treble from 1.3 million last year to three million as the furlough scheme winds down in the coming months.
Unemployment would rise to a peak of 3.5 million in 2021, the OBR warned in its report.
TUC general secretary Frances O’Grady stressed that having more people in work and paying taxes will pull the country out of economic ruin faster.
She slammed ministers for their lack of an action plan for businesses and workers beyond October 31, when the furlough scheme ends.
“The OBR report shows that the biggest danger to the economy is a sharp rise in unemployment,” Ms O’Grady said.
“But we’re still seeing too much of a wait-and-see approach, with jobs in viable businesses going to the wall because ministers fail to act.
“The Chancellor [Rishi Sunak] should be going all out to push back the rising tide of job losses. The more people in work, the faster our recovery will be.
“That’s the best way to support the public finances, with more people earning and paying tax.”
Resolution Foundation research director James Smith said that Mr Sunak made a “significant gamble” in not setting out more support for the sectors hardest-hit by the coronavirus – such as hospitality, health & beauty, retail and travel – in his summer economic statement last week.
He warned of unemployment levels to match “or even surpass” levels at their peak in the 1980s.
“The risk of 1.3 million furloughed workers moving straight into unemployment should prompt the Chancellor to consider further action on jobs,” Mr Smith added.
In its report, the OBR said that GDP is set to fall by 10.6 per cent in even its most optimistic projection, but could recover to its pre-virus peak by the first quarter of next year.
In its middling scenario, the OBR suggests that GDP could fall by 12.4 per cent before returning to its pre-virus level by the end of 2022, but still with “elevated” levels of unemployment and failing businesses.
It came as the Office for National Statistics reported that the economy grew by just 1.8 per cent in May, as it struggles to recover from record falls in March and April.
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