Debt could hit levels not seen since 60s

BORIS Johnson’s public spending splurge could see Britain’s debt hit levels not seen since the Sixties in a No Deal Brexit, economists said yesterday.

The Institute for Fiscal Studies think-tank said Government borrowing was set to rise to more than £50billion next year thanks to the Prime Minister’s spending pledges.

This is equivalent to 2.3 per cent of national income – well over the Government’s fiscal mandate limiting borrowing to 2 per cent.

But the IFS warned that in the event of No Deal, borrowing would soar to almost £100billion, or 4 per cent of national income. This would lead to a debt level of nearly 90 per cent of national income. The think-tank also revealed that:

Mr Johnson’s plans for public spending were close to the levels implied by Labour’s 2017 manifesto;

Public spending was due to rise by 4.4 per cent next year – the highest in ten years;

UK growth has been weaker than all other G7 members since 2016, with national income 3 per cent lower than it would have been without the EU referendum result;

A further delay to Brexit would mean just 1 per cent growth next year, while No Deal would result in two years of zero growth. Last month, Chancellor Sajid Javid unveiled billions more in day-to-day spending.

He said that every department would see its budget rise – for the first time since 2002 – to pay for more police, more nurses and more teachers. And he hinted at the Tory conference last month that he might scrap inheritance tax.

But IFS director Paul Johnson warned: ‘Things have changed remarkably quickly in public finance land. The Government is adrift without any effective fiscal anchor. Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways. In the case of a No-Deal Brexit, though, it should be implementing carefully-targeted and temporary tax cuts and spending increases where it can effectively support the economy.’

A Treasury spokesman said: ‘September’s spending round supported people’s priorities of health, education and the police within existing fiscal rules. Beyond that, the Chancellor has said we will be reviewing the fiscal framework as we turn the page on austerity.’

Meanwhile, it emerged yesterday that total retail sales fell by 1.3 per cent in September compared to last year, the worst performance for the month since records began in 1995, the British Retail Consortium said.