According to the CEBR, the unexpectedly high cost of the outbreak together with a slowdown in the economy would put a strain on the government’s purse, creating a £7bn gap in its spending plans.
The CEBR calculated the crisis will cost the government about £3bn this year.
Coupled with a £2bn drop in tax revenue from recession in the manufacturing industry, this could lead to an economic deficit of between £1bn and £2bn in the current financial year instead of the £4.7bn surplus previously predicted.
Chief executive Douglas McWilliams told the Evening Standard he believed there would be no short-term disaster, but the outlook in the long term was pessimistic.
He said that in two years ‘either they will have to cut back on spending or put up taxes, and, if the economy weakens, they could have even worse problems’.
But a Treasury spokesman refuted the comments, saying the government’s spending programme would go ahead as planned because the government’s economic policies were based on prudent and cautious assumptions.’
The news comes as protests mount after the government changed its compensation policies over the valuation of culled animals last week.
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