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CORONAVIRUS FISCAL MEASURES IN THE OECD


Jul 19 2024

Spending on the coronavirus pandemic in the UK totalled £376 billion from
February 2020 to 31 March 2022 according to the National Audit Office,[1] a
figure so large it could cover the cost of bailing out the banks in 2007-09 over
16 times.[2] This cements the pandemic as the most expensive domestic crisis of
the 21st century. The UK was not alone in borrowing and spending vast sums
during the pandemic, with countries in the Organisation for Economic
Co-operation and Development (OECD) generally doing the same as they had cheaper
financing costs than other countries.

With half a trillion dollars going on ‘above the line’ measures – those which
increase government expenditure or reduce tax revenue – the UK was fourth place
in absolute terms compared to other nations studied in this report.[3] However,
the UK is second place in terms of spending as a percentage of GDP: at 19 per
cent, the UK was only surpassed by the US which spent 26 per cent over this
period.

It is often taken for granted that this spending was an unavoidable consequence
of a global health disaster. However, the range of pandemic policy responses
across the OECD shows that various options were available, and that the pandemic
response pursued by the UK government was just one choice among many. Whereas
the USA decided to implement much higher unemployment benefits, the UK instead
opted for a furlough scheme which saw 11.7 million jobs supported by it.[4]

The UK was one of the world’s leading spenders on coronavirus measures,
including financial support like business loans and furlough, measured in both
absolute and relative terms. Despite spending more than similar countries on the
pandemic, the UK did not have success in reducing excess mortality. Across these
OECD nations, Japan and Norway had the lowest excess deaths while also being
some of the lowest spenders. Consequently, it can be argued that in the wake of
the coronavirus pandemic the UK is now landed with far higher debt than was
necessary.

This paper explores UK spending on coronavirus measures in the context of OECD
nations including Norway, Sweden, Japan, France, Germany and the United States.
These countries were selected for a range of reasons. The United States because
it spent the most during the pandemic and did not deploy a furlough scheme,
Germany and France because of the similarities in their pandemic responses,
Japan for their experience in handling respiratory virus outbreaks and, Norway
and Sweden for their limited coronavirus interventions. By selecting these
nations, it allows comparisons to be made across a range of similar and
differing spending decisions in each country and their impact compared to those
in the UK.

 


READ THE RESEARCH PAPER

 

[1] National Audit Office, COVID-19 cost tracker, 23 June 2022,
www.nao.org.uk/overviews/covid-19-cost-tracker/, (accessed 25 January 2024).

[2] Mor, F., Bank rescues of 2007-09: outcomes and cost, 08 October 2018,
commonslibrary.parliament.uk/research-briefings/sn05748/, (accessed 25 January
2024).

[3] Above the line measures can include additional spending, tax measures, and
deferrals of tax payments.  They are mostly reflected in the fiscal balance,
government debt, and short-term increased borrowing needs.

[4] Francis-Devine, B. et al, Coronavirus Job Retention Scheme: statistics,
House of Commons Library, 23 December 2021,
commonslibrary.parliament.uk/research-briefings/cbp-9152/#:~:text=Supporting%20documents&text=11.7%20million%20employee%20jobs%20were,member%20of%20staff%20on%20furlough,
(accessed 6 February 2024).



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