Manufacturing and construction are two of the worst-hit sectors, but it would be a mistake to reopen both areas out of concern for public finances, the center-left-leaning New Economics Foundation said in an analysis posted on its blog Sunday. It is a false dichotomy to pit the health of the public purse against the health of the workforce, according to the group.
The analysis came the same day U.K. Prime Minister Boris Johnson, in a prerecorded address to the nation, announced that workers in the construction and manufacturing sectors should return to work Monday. British Foreign Secretary Dominic Raab subsequently walked back the statement, saying Johnson had meant for workers to return Wednesday.
A left-wing group of Labour Parliament members, including former party leader Jeremy Corbyn, attacked Johnson's call for blue-collar workers to return to work while white-collar workers continue to work from home. It was called a "thinly veiled declaration of class war," in a statement published on social media Monday.
The think tank's analysis said retail was the hardest-hit sector in the country, with tax revenue falling 27%. Manufacturing was next with a drop of 21%, followed by professional services at 14%, information and communication at 10%, education at 8% and construction at 7%.
The foundation also warned against raising taxes during the crisis, because the economy needs money available for people to spend — especially those with low income, who are more likely to spend it.
One option available to the government to deal with the crisis is to temporarily cut taxes to stimulate demand, the report said. However, it also said taxes will need to increase in the long run, especially for high earners.
"Key areas for future tax rises should be income received from wealth — such as through corporation tax, dividend income tax and inheritance — and higher rates of tax for those companies and individuals with the highest incomes," the foundation said.
One way to support the economy would be to boost demand by raising government spending, increasing both pay and the number of jobs for key workers, the group said. Austerity measures such as those imposed in the past would be a bad idea, it warned.
"Whatever government chooses, further austerity cannot be on the cards," the group said. "The huge and costly mistakes from the last decade must not be repeated."
The nonpartisan Center for Economic Policy Research published data Sunday showing that the drop in consumer spending in the U.K. due to the pandemic is worse than originally thought. The Bank of England — the British central bank — released a forecast last week predicting a 30% drop in demand, but according to the center's data, the figure could be as high as between 40% to 50%.
HM Treasury didn't immediately respond to a request for comment.
Neither the New Economics Foundation nor the Center for Economic Policy Research immediately responded to a request for additional comment.
--Editing by Neil Cohen.
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