Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications IFS Director Paul Johnson responds to the Office for Budget Responsibility (OBR) Coronavirus reference scenario publication

IFS Director Paul Johnson responds to the Office for Budget Responsibility (OBR) Coronavirus reference scenario publication

Press release

This afternoon the Office for Budget Responsibility (OBR) published their Coronavirus reference scenario publication, which sets out an initial exploration of the possible impact of the coronavirus outbreak on the public finances. In it, they say that: "Our rough judgement was that this would increase public sector borrowing this year by £218 billion relative to our March Budget forecast (to reach £273 billion or around 14 per cent of GDP). Once the crisis has passed and all the policy interventions have unwound, borrowing falls back relatively quickly to roughly the Budget forecast, but net debt would remain around £260 billion (10 per cent of GDP) higher by 2024-25".

Responding to these new figures, Paul Johnson (IFS Director) said:

"We must not underestimate just how staggering these figures are, and by how much the economic outlook has shifted compared to just a few months ago. Government borrowing is set to rocket to levels well above those seen during the financial crisis, and debt is set to approach 100% of GDP. These figures are predicated on a short-term economic hit and a swift recovery. Should the lockdown last for longer than 3 months or the economy fail to bounce back, the picture would worsen further. We will need a complete reappraisal of economic policy once the current economic dislocation is behind us. Tough decisions will have to be made which are likely to involve tax rises and higher debt for some time to come. The only other alternative would be another period of austerity on the spending side. That looks unlikely"

Notes to editors

1. You can find the OBR's Coronavirus reference scenario publication on their website here: https://obr.uk/coronavirus-reference-scenario/

2. You can find ongoing IFS analysis on the economic effects of Coronavirus (Covid-19) and policy responses to it here on our website: https://www.ifs.org.uk/coronavirus

Coronavirus podcast

More on this topic

Press release
Despite improving public finances this year, the Chancellor is likely to have very little room for manoeuvre in his forthcoming Spending Review. That is because while the economy is recovering more quickly than expected at the March Budget, this may not translate into a permanent improvement in the ...
Press release
In early 2021, unemployment, real earnings growth, arrears on household bills, and food-bank use were all at similar overall levels to pre-pandemic. This is an astonishing outcome given the scale of economic disruption and loss of national income over the last 15 months. But this masks groups who ...
Book chapter
Delivery-driver-wearing-mask
IFS Working Paper W21/18
The COVID-19 pandemic has led to significant changes in where people work, eat and socialise. We use novel data on the food and non-alcoholic drink purchases from stores, takeaways, restaurants and other outlets to quantify the impact of the pandemic on the diets of a large, representative panel of ...