£2trillion in debt after virus bailout
Chancellor hints at tax rises
THE national debt topped £2trillion for the first time yesterday.
Official figures revealed the extraordinary scale of the UK Government’s borrowing binge in the face of the pandemic.
Almost £27billion was borrowed in July, bringing the total to more than £150billion in only four months – almost three times the sum for the whole of last year.
The nation is now £2.004trillion in the red – the equivalent of around £72,000 a household, double the total a decade ago. For the first time since 1961, public debt outstrips annual economic output.
Rishi Sunak warned that the stark figures meant ‘difficult decisions’ lay ahead. In an interview with the Mail, he said the Government’s emergency measures had helped to support millions of jobs and without them things would have been much worse.
He added: ‘Over the medium term, we must – and we will – get our finances back on a sustainable footing to avoid debt soaring, and we need to be honest with people that this will require difficult decisions.
‘We can’t continue to provide this level of support indefinitely, so as the economy reopens and more people can return to work safely, it’s right the nature of our support changes.’
The Chancellor’s comments will fuel concerns that he is trying to prepare households for tax rises and spending cuts.
The Institute of Fiscal Studies has warned that the Government should continue to focus on the recovery but will have to start raising taxes from 2022.
The Prime Minister has been adamant about not returning to austerity, vowing to help create jobs and boost spending on big infrastructure projects. But the Chancellor has refused to rule out the prospect of tax rises, despite Tory manifesto promises to not increase income tax, national insurance and VAT.
Isabel Stockton, a research economist at the IFS, said: ‘This year’s budget should focus on securing the recovery. The extent to which weakness in the economy endures, alongside demands for increased spending, will be big challenges for future budgets.
‘But following a decade of cuts in many areas it would be surprising if tax rises were not to follow.’
Mr Sunak has resisted pressure to extend the £35billion Job Retention Scheme, amid fears its closure in October will spark mass redundancies. He has described ending the scheme – which has supported 9.6million jobs – as the most difficult decision of his career.
The Chancellor has acknowledged it will result in many workers – including those still on furlough – losing their jobs.
Figures published by the Treasury yesterday revealed 6.8million workers were still furloughed at the end of June. But separate data released by the ONS earlier this week indicated that this number had fallen to around 4million, with one in eight workers now on furlough, as the lockdown has lifted.
A string of well known companies, ranging from Marks & Spencer to British Airways and Rolls Royce, have already announced plans to lay off thousands of staff.
Figures revealed by the ONS last week showed 730,000 workers have fallen off payrolls since Covid began.
Andrew Wishart, UK economist at Capital Economics said: ‘People are going to have to realise that in a post-business world many people will lose their jobs.’
‘Finances back on sustainable footing’