Video: Chancellor warns of a 'significant recession' (Sky News) ____________________________________________________ More on coronavirus: ____________________________________________________ If the economy takes longer to recover, the figure could be even higher, topping £500bn in worst-case treasury estimates. Lord Robert Skidelsky, the biographer of John Maynard Keynes, says there is a risk of an inflationary depression, with the supply capacity of the economy badly affected by the crisis but spending power protected by wage subsidies. Gerard Lyons, senior fellow at the thinktank Policy Exchange and economic adviser to Boris Johnson when he was mayor of London, says it would be a mistake to repeat the austerity programme introduced by George Osborne when the coalition government took power in 2010. Gallery: Coronavirus turns the world into a ghost town (The Atlantic) David Davis, the former Brexit secretary, agrees that the approach should be to pay off the debt accumulated during the crisis over time. It’s a bonkers idea.” Osborne’s view that the deficit had to be tackled head-on was motivated by fear that investors would take fright at the state of Britain’s public finances and demand higher interest rates for holding government debt. Mervyn King, who as governor of the Bank of England encouraged Osborne to take a tough line on the deficit, said this week that Sunak should continue with the furlough scheme until recovery was well established. Sunak is unlikely to order the Bank simply to print the money to finance his spending, but instead will hope stronger growth, a bit of inflation, a higher tolerance for debt among investors, and time will dig him out of the hole.
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