Questions and answers about coronavirus and the UK economy

Public spending, taxes & debt

Is the Covid-19 recession caused by supply or demand factors?

UK GDP is falling sharply in part because firms are less able to produce goods and services, and in part because consumers aren’t spending as much. Which mechanisms are the most important – and why does this matter for policy-makers?

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Rebuilding after the Second World War: what lessons for today?

How did the UK reduce its very high ratio of public debt to GDP after the Second World War while simultaneously expanding the welfare state? Low interest rates, low unemployment, rapid economic growth and tolerance for higher taxation all played a role.

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What is the likely future role of the state in the UK economy?

Economic distress caused by the pandemic, the lockdown and the recession have required a big increase in public spending. How has the crisis affected the size of the state and the effectiveness of government policy?

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What are the likely effects of the crisis on charitable donations?

The lockdown, the recession and increased uncertainty are all likely to affect people’s incomes and what they do with their money. That includes decisions about what they donate to charities – how much to give, which causes to give to, when to give and how to give.

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Can policy steer us towards a greener and fairer recovery?

By acting fast, coordinated policy can create jobs and steer a resilient, inclusive and sustainable recovery from the Covid-19 crisis. The alternative of a prolonged global depression and unmanaged climate change would be profoundly damaging.

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What can we learn from the past about how to pay for the crisis?

Big increases in government borrowing and total public sector debt have been an essential policy response to the health and economic effects of Covid-19. But such rises are not unprecedented – and we can learn from past experiences about how best to deal with the challenges that they pose.

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What is the size of the fiscal multiplier?

What is likely to be the impact of a government stimulus or austerity plan in response to the coronavirus crisis on the whole economy? That is what is measured by the ‘fiscal multiplier’ – and the evidence indicates that increased public spending has a bigger impact during recessions.

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Quantitative easing and monetary financing: what’s the difference?

In March, the Bank of England’s Monetary Policy Committee restarted the programme of asset purchases known as quantitative easing or QE to provide support for the economy during the coronavirus crisis. How does it work and does it constitute ‘monetary financing’?

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‘Monetary financing’: is it happening and what are the dangers?

Has the Bank of England been ‘printing money’ to pay for government programmes to tackle the economic damage from the coronavirus crisis? No: it is useful to understand the division of responsibilities between fiscal policy and monetary policy – and why it exists.

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How does the government’s furlough scheme work?

The Coronavirus Job Retention Scheme was set up to encourage employers to keep their staff on during lockdown and make it easier for everyone to return to work when restrictions lift. How does the furlough scheme work and what will happen to jobs as it’s wound down?

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What is the impact of the crisis on UK university finances?

The Covid-19 crisis is causing potentially large-scale financial problems for UK universities. It is likely to result in big changes in the way that the country’s higher education system is structured.

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Funded by

UKRI Economic and Social Research Council
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