Sunak ‘can’t afford big giveaways’

RISHI Sunak could have little room for major tax giveaways in this week’s Budget, according to a group of influential economic analysts.

The ITEM Club forecast a surplus of just £5 billion for tax cuts or day-to-day spending increases if he is to stick to the Tory manifesto pledge to balance the current budget in three years.

That could be squeezed further if the Office for Budget Responsibility downgrades growth forecasts, it said. The warning comes ahead of the first Budget under Prime Minister Boris Johnson.

Sunak – who replaced Sajid Javid as Chancellor only last month – promised on Friday a Budget that ‘will lay the foundations for a decade of growth’. But Howard Archer, chief economic adviser to the EY ITEM Club, said he may be restricted by the Tory Election promise.

‘There has been positive momentum in the UK economy at the start of 2020, but the near term outlook now looks more challenging with the escalation of the coronavirus outbreak,’ said Archer.

‘He will have to work carefully to maximise the benefits of the money he has at his disposal.’

The ‘centrepiece’ of the Budget is likely to be an uplift in debt-financed Government investment on infrastructure, aided by low borrowing costs.

That could add £15 billion to £20 billion of capital spending per year for ‘levelling up’ the economies of struggling towns. But the task of raising the promised £100 billion over a fiveyear period ‘should not be underestimated’, the ITEM Club said.