Exceptional measures don't come cheap

Rishi Sunak promised so much in his Budget that's its impossible to tot up just how much it will all cost. That is not a good thing, says Merryn Somerset Webb – the long-term effects of overspending are rarely good.

Outgoing Bank of England governor Mark Carney © Getty

The arrival of coronavirus in China at the beginning of the year represented an immediate supply shock to the global economy (the Chinese stopped producing and exporting). That created its own demand shock (they weren’t buying either – and the rest of us started to get nervous as the virus spread). This was unusual enough – you don’t often get demand and supply shocks at once. But it’s got a lot weirder since. First another supply-shock bomb appeared in the form of the new oil wars. And then, another whopping demand shock (a positive one this time) turned up in the form of massive monetary and fiscal stimulus in the UK.

On Wednesday, the Bank of England cut interest rates by 0.5% and took various measures to make sure credit keeps flowing. The rate cut is more grandstanding than anything else – and comes with all the usual downsides (bad news for savers and terrible news for pension funds). Cheaper money is also clearly not going to do much to overcome the virus itself, or indeed to persuade consumers to nip to the shops.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.