The Cost of Covid-19

 by Flixy Coote

As this year draws to an end, almost 2 years on from the start of Covid, the economic impact of COVID 19 has finally started to emerge and will continue to emerge over the coming months as it continues to take its toll. 

Since the beginning of 2020, the government has had to spend billions and billions of pounds on fighting the virus and boosting the economy, due to a decrease in the amount of money raised by taxes this has put even more of a strain on the government. All of this has forced the government to borrow large sums of money. Between the april of 2020 and the April of 2021, the government borrowed the most amount of money they've borrowed since 1946, £299 billion. However when the figures get released in the coming April of 2022, it is expected that the government would have borrowed less, depending on what happens this winter, but most likely still above £200 billion. 

Recent figures, taken from the National Audit Office, show that the government has spent £370 billion on Covid between February 2020 and July 2021.

One could be wondering where around £300 billion has gone but when you look into the figures it really shows how quickly money can be spent. As expected, the NHS and public services have required extra funding to be able to fight the pandemic, this is at an estimated £84 billion. £154 billion, as of July, has been spent on boosting businesses and jobs, a lot of this went to the furlough scheme where the government had to step in to pay for most of the worker’s wages. The furlough scheme also had a knock on effect for the government as the unemployed or furloughed workers paid less income tax, businesses also paid less tax due to profits being lower and the profits coming from VAT were much lower as shoppers were spending far less. 

With the money going into the government being far less than the money coming out, it forces the government into deciding upon one option; borrowing. This is a vicious cycle, to pay back borrowing fees the government has to borrow yet more money and it does not seem that the pandemic is coming to an end so this could go on for many more years and then take years after to recover. 

There seems to be only one or two solutions to this whole problem, to raise taxes but this could spark a whole number of issues. With many people unemployed, working less or on a reduced salary, an increase in taxes could send the country into a potential economic depression, sparking poverty levels and increasing unemployment rates even further. The government, upon election in 2019, promised to not raise the rates of the three biggest taxes but this is becoming increasingly unrealistic. The other solution would be to cut spending in some areas like schools and the NHS, but this would be incredibly difficult after a pandemic due to catch up work needing to be done in school and a backlog of all the health procedures needing to be done.

As the UK heads further and further into debt, and as no one knows what will happen with covid it is becoming clear that something really does need to change before we splurge into debts that the UK economy will not survive the hit from.