Coronavirus: Hard decisions over the economy loom

The BBC's political editor asks Rishi Sunak if the UK is looking at a recession due to the coronavirus outbreak.

By Laura Kuenssberg
Political editor
@bbclaurak

The chancellor turned 40 today.

The tiny number of staff at work in Number 11 did make an effort at celebration in these grim times with, apparently, a few balloons in the office.

There is, though, not much time in government for anything other than trying to get through this emergency - nor anything to celebrate.

The impact on the economy has already been so extreme that Rishi Sunak confirmed today that the taxpayer will carry on paying 80% of the wages of more than seven million people until the end of July and then sharing the cost of that with employers, extending the furlough scheme until the end of October.

The idea is the Treasury picks up swathes of the country's wage bill so that businesses can close their doors but can keep their staff on standby.

The plan has, ministers firmly believe, staved off a much, much more serious economic disaster where we'd be heading into a period of mass unemployment.

By carrying on for a few more months, the hope is to keep the brakes on, to stop a slide into profound and prolonged downturn.

There are fears about the extension, however: not least how much businesses will be asked to share the bill from August.

What happens to businesses who still haven't reopened by then and still have no income, so can't split the bill?

What about businesses who decide not to reopen?

There are also fears among some ministers about how extending the scheme for every part of the economy reduces the incentive for people to go back to work and businesses to reopen too.

But, in the months to come, the question for the government is likely to extend far beyond the dilemmas over furlough.

More broadly, they may have to consider which sectors of the economy do they ask the taxpayer to help preserve, and which do they let go?

In this emergency phase, we are living with an astonishing level of state support being lent to keep big swathes of the economy afloat.

This chancellor and this Tory government are prepared to wear massive levels of borrowing for the foreseeable future. There will, in time, be a limit and an end point to how much more to add.

But many industries' models may not work for a long time; the sums may simply not add up.

Rishi Sunak may therefore have to decide whether it's the right thing to keep propping up business and industries whose future after corona may not be viable.

That's not just a decision about what we need, and how we want to earn our living as a country in the future, but a series of political choices about what the economy ought to look like in the years to come.

When ministers make decisions about the best use of taxpayers' money - awful though it may be to consider - the changes that Covid-19 has forced on our way of life may mean that some previously successful businesses may simply not be able to make the sums work for a very long time on the other side.

Not that long ago, the chancellor and others talked brightly of a swift bounce back to the economy.

It is, of course, possible that may yet happen. There is, and will continue to be, vigorous economic debate about exactly what the numbers display.

But politically a mood is sinking in now, that very hard decisions about the shape of the country's income will have to be made.

When we asked him today about whether we're facing recession, the chancellor was reluctant to use the "r" word - recession - but accepted there were signs it was already happening.

He says his own "heart breaks" as people are already losing their jobs.

But it may not be long before he and the prime minister have no choice but to acknowledge the economic reality more explicitly - the sting in the virus' poisonous tail may be hardship for massive numbers of people in the country and harder decisions for Number 11 too.