London urged to ‘tell truth’ about health of economy

The United Kingdom’s former chancellor Philip Hammond has urged the government to tell the British people “some difficult home truths” about the cost of the COVID-19 pandemic and the state of the economy ahead of next week’s budget.

The country’s public sector borrowing this year is now estimated to be 340 billion pounds ($480 billion) higher than it would have been without the COVID-19 pandemic, an analysis by the independent think tank the Institute for Government said.

Speaking to the BBC, Hammond said ministers “made very extravagant commitments to the British electorate in good faith before the coronavirus crisis”, but the government must now ditch those promises made in its 2019 election manifesto.

“My fear is that, as a populist government, giving money away is always easier than collecting it in,” said Hammond, who served as chancellor throughout Theresa May’s premiership.

“The government will be tempted not to move quickly back to normalizing the relationship between government and citizen, the balance between taxing and spending, as we move out of the crisis and into the next phase, which is dealing over the longer term with the legacy of this COVID crisis — what the economists called the scarring effect on the British economy.”

In response to Hammond’s comments, a Treasury spokesperson said Chancellor of the Exchequer Rishi Sunak “will be honest” about what is needed when he delivers the budget on Wednesday.

The spokesperson said: “The chancellor has always put protecting jobs and livelihoods at the heart of everything he has done and that will not change. This budget will give people the reassurance they need in the immediate term, and he will be honest with the British people about how we are going to recover beyond this crisis.”

Sunak is considering raising taxes on business amid rising unemployment and following the nation’s biggest annual economic shrinkage on record.

Figures from the Office for National Statistics show the UK economy contracted by 9.9 percent in 2020, more than twice as much as in any previous year on record, BBC News noted.

The unemployment rate has risen to its highest level in almost five years, with new figures showing it had grown to 5.1 percent in the three months to December, the worst since 2015.

Reuters news agency reported Sunak will likely promise “yet more spending” to “prop up the economy” during what he hopes will be the “last phase of lockdown”, which is expected to be lifted entirely in late June.

The Financial Times said Sunak’s budget will be “drenched in red ink” and his key message will be that the “borrowing binge cannot last forever”. The paper reported officials working on the budget have said UK corporation taxes could rise from 19 percent to 25 percent.