taxresearch | I have already discussed the potential economic implications of coronavirus this morning. The purpose of this blog is to summarise the underlying economic logic of what I have said.
We will have an economic crisis in 2020 as a result of coronavirus.
There can now be no doubt of that; the likelihood that this epidemic can
now be contained seems to be very low indeed. The evidence from China
is that the impact on productivity and the economy at large is enormous.
Whether we can survive the impact of this epidemic without major
economic consequences arising is largely dependent upon the
effectiveness of the planning that the government undertakes now. What
is apparent is that at present there are a few signs that this planning
is taking place. We can hope for it in the forthcoming budget, but the
signs are, so far, not good.
The key issue that the government has to decide upon is who will bear
the economic consequences of what is to happen. I have already
indicated in my first post on this issue that I think that the
consequences of this epidemic will fall upon three clearly identifiable
groups, which are individuals, businesses and government. However, when
appraising who will bear the cost the criteria are slightly different.
It is unacceptable that individuals bear the cost of this crisis.
There is simply too little economic resilience within the population as a
whole for that to be the case. Far too many people have too few savings
to survive major periods of economic inactivity without massive
prejudice to their short-term and long-term well-being.
In addition, it is unacceptable that many businesses should fail
through no fault of their own but that is what will happen unless the
government steps in to prevent the major economic downturn that might
happen this year. Cash flow issues will cripple many companies.
In that case it would seem that consequences of what might happen will fall, in the first instance, on the government.
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