As UK Prime Minister Boris Johnson was laying out his multibillion-pound plans on Tuesday for a so-called new deal, with investment in major infrastructure programmes to counter the impact of the recession, the UK economy was facing more grim news.
The latest data from the Office for National Statistics (ONS) showed that in early 2020 - including the first few days of the lockdown - the economy shrank by the most since 1979, as households cut back on their spending.
According to the ONS, gross domestic product (GDP) fell by a quarterly 2.2 per cent between January and March. The ONS data shows that household spending fell dramatically by the largest amount in terms of cash since records began in the 1950s, as people held back on spending and household savings surged from 6.6 per cent at the end of 2019 to 8.6 per cent in the first quarter. During the lockdown most businesses were closed, meaning that people could not spend even if they wanted, especially in the leisure and entertainment sectors where people would frequently spend in the evenings and weekends. Boris Johnson has said that there will be no return to the austerity introduced by the Conservative government in 2010. He has instead opted for government-led spending to get the economy back to where it was in late 2019, before the impact of the coronavirus pandemic. The increased government spending on infrastructure is a good start, however, Boris Johnson's usual bluster and bloviation are not enough to cover up the plan's shortcomings. His comparison of the plan to what President Roosevelt did in the United States in the 1930s under the 'New Deal', fell apart as soon as reporters started asking questions at the press conference that followed his speech. It was pointed out to him that the UK plan is hardly on the same scale as the legendary US programme that was implemented to tackle the Great Depression. Boris Johnson's spending plan is worth around £5 billion, which comes to about 0.2 per cent of the UK's GDP. Compare that to President Roosevelt's New Deal which was more expansive and was around 40 per cent of the US national income of 1929.
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