Former chancellor Sajid Javid has said the government should “run the economy hot” and lift coronavirus restrictions to encourage growth.
He also suggested “bad banks” could be created to help the UK’s lenders which are set to struggle with bad loans as coronavirus crashes the economy.
Javid’s intervention came after the Bank of England yesterday said the UK economy is heading for its worst crash in 300 years in 2020. However, the Bank predicted a sharp recovery by the middle of next year.
Javid, who stepped down as chancellor in February after a dispute with Prime Minister Boris Johnson over advisers, told Sky News it will be “challenging” to achieve such a rebound.
Yet he said “reopening” the economy as soon as possible is vital to ensuring rapid growth.
In the most high-profile intervention in favour of a reopening so far, Javid said the country needs “to think carefully about the impact on the rest of society and the economy” of the lockdown.
“When it comes to opening up you want to go as far and as quick as you can.”
There is a deep divide over the best course of action, however. Many, reportedly including the Prime Minister, believe lifting coronavirus lockdown measures too soon could cause a second wave of infections that would devastate the economy.
The former chancellor said the best approach would be “running the economy hot” while monitoring the virus.
Javid, who was an executive at Deutsche Bank in the 2000s, said Britain’s lenders may need support during the crisis.
He said they might have to be made to raise more capital to make sure they can keep lending to businesses.
He also suggested the government “should dust off” a financial crisis-era ‘bad bank’ policy “which was never properly implemented in the end because it wasn’t needed”.
“You have some kind of support for banks with some of the worst-performing loans and try to help the banks in that way, so that they can in turn help the economy and lend,” he said.