Parts of the left seem desperate to turn the debate about the appropriate economic response to Covid into a rerun of the debate from the last decade over public spending. Problem is the evidence doesn’t suggest that is at all how HMG is approaching it 1/ https://twitter.com/georgeeaton/status/1259429233753022466

Scale + nature of the initial support package was unprecedented. Deficit will be significantly higher this year than at its height during the financial crisis. UK has led the way globally in terms of the response - particularly in the impressive fiscal / monetary co-ordination 2/

No evidence fiscal policy will be anything other than v supportive until the economy is firmly back on its feet. But nature of the support will need to evolve. As Paul Johnson has said, at some point the furlough scheme starts to be counter-productive https://twitter.com/PJTheEconomist/status/1258402623205539841 3/

So the furlough scheme will slowly need to be withdrawn, and fiscal support will likely need to evolve into a more traditional demand stimulus to encourage businesses / consumers to spend as restrictions are eased + the economy begins to get back to something more like normal 4/

But HMT will be very nervous about the details of any demand stimulus leaking, particularly any shorter-term tax cuts, in case it makes consumers / businesses delay spending - which would obviously be v damaging for companies desperate for revenue now in order to survive 5/

Long-term even if low interest rates mean we are more relaxed with higher levels of debt / deficits than a decade ago, likely structural hit from the crisis means there will need to be some form of consolidation. But no evidence that will happen before econ is fully recovered 6/

When it comes to the substance of that consolidation, the left seem desperate to say more big spending cuts are on the way, despite the fact the PM has clearly distanced himself from austerity, and the Chancellor’s has already hinted on the need for tax rises in the future 7/

And let’s not forget the Budget – which at the time saw the biggest fiscal loosening since early 1990s – was all about spending increases. It actually saw a net tax rise of £7.5b /year. Not sure an attack line based on Tories planning another decade of cuts will last long... /end