Rishi Sunak fuels fears over looming tax hikesAugust 7, 2020
Rishi Sunak fuels fears over looming tax hikes as he vows to balance the books once coronavirus crisis eases – but pledges that public spending WILL keep rising
- Rishi Sunak admitted the economy likely to be smaller as a result of coronavirus
- He insisted the government will need to balance books over the medium term
- Mr Sunak said public spending will continue to rise in real terms despite squeeze
Rishi Sunak fueled fears of looming tax hikes today as he vowed to balance the books once the coronavirus chaos eases – but insisted public spending will keep rising.
The Chancellor admitted that the economy will be smaller in future due to the dramatic impact of the pandemic, which is expected to cause the worst recession in 100 years.
He said the government was in ‘crisis mode’ and borrowing huge sums but would need to put the public finances back on a ‘sustainable’ footing in the medium term.
However, he made clear that government spending will not be curbed in order to clear out the shortfall – seemingly leaving tax rises.
The comments came after the Bank of England predicted that GDP will slump 9.5 per cent this year with unemployment rising by more than a million – although the hit might not be quite as bad as initially feared.
Rishi Sunak (pictured on a visit to Glasgow today) said the government was in ‘crisis mode’ and borrowing huge sums but would need to put the public finances back on a ‘sustainable’ footing in the medium term
The government is expected to borrow £300billion this year, with the national debt soaring over £2trillion and being bigger than the whole economy for the first time in decades.
Experts have warned that the Treasury is likely to need to raise an extra £35billion a year once the immediate crisis subsides – broadly equivalent to an extra 7p on the basic tax rate.
In a round of interviews on a visit to Scotland this morning, Mr Sunak said that the government was right to borrow ‘a significant amount of money’ this year to prop up businesses and households.
‘That said, without question the virus has taken a toll on our economy and that will have a long run impact over the next few years,’ he told Sky News.
‘Our economy will likely be a bit smaller than it otherwise would have been. That obviously has implications for what we can afford to do.
‘Our public finances have taken a significant hit and over the medium term we will obviously need to put our public finances on a sustainable footing.
‘We cannot continue to operate in the way that we have done this year in crisis mode.’
Speaking to Times Radio, Mr Sunak spelled out that public spending will keep going up despite the constraints.
‘What we’ve said, in all cases, there won’t be a return to austerity,’ he said.
‘Public spending will continue to grow in real terms, so people should know that. We will continue to invest in our public services. Money going into public services will go up, it won’t go down.
‘But our public finances have taken a significant hit alongside the economic shock we’re currently experiencing and that will mean we will need to make some difficult decisions going forward.’
Mr Sunak – consistently one of the most popular members of the Cabinet – was also asked whether the extreme workload of the crisis had dampened his desire to be PM one day.
‘Oh gosh, I don’t have that desire,’ he said.
Mr Sunak said it was ‘fair’ to say he was tired after months of dealing with the fallout from Covid.
‘It’s not just me lots of people, not just in government, but up and down the country in all their different ways have been working around the clock – people on the frontline through to the prime minister himself,’ he said.
‘We’re all dealing with something we haven’t had to deal with before.
‘It’s hit us at extraordinary speed and severity and everyone in their different way is trying to do the best they can.
‘That often requires working very hard, and it is stressful because it is very uncertain.’
The latest prediction from the Bank suggests the downturn will be the biggest since the early 1920s, when the First World War and Spanish Flu hammered the economy
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