THE £300BN BLOW-OUT BLOW-OUT Rishi tries to quash fears that deficit is getting out of control

ThE ChANCELLOR vowed to get Britain’s public finances under control amid fears the spiralling cost of bailing out the economy will push the deficit above £300 billion this year.

As Rishi sunak unleashed another £30 billion jobs rescue package, the Treasury revealed the estimated cost of emergency measures launched when the coronavirus crisis began has soared to just under £160 billion.

This was almost £30billion more than the Office for Budget Responsibility estimated just last month, and it pushes the total coronavirus bail-out bill to almost £190 billion.

The dramatic rise was driven by increased spending on public services, such as hospitals, schools and public transport, which the Treasury said had risen by almost £49billion since March. Of this, almost £32billion has been approved for health services, including £15billion on personal protective equipment for frontline workers.

Even before yesterday’s announcement, the Office for Budget Responsibility had expected the deficit for this year would hit £298.4billion

– the highest figure as a share of national income since the second World War.

But yesterday Britain’s leading economic think-tank, the institute of Fiscal studies, predicted the black hole in the finances would smash through the £300 billion barrier, and said it also expected the Chancellor to unleash more spending to combat the crisis.

iFs deputy director Carl Emmerson warned that the Chancellor may have to raise taxes if the economy did not bounce back sharply.

he said the Government was borrowing at very low interest rates, but added: ‘What matters more for the public finances will be the extent to which the economy manages to bounce back strongly. if – as is likely – the economy does not fully recover, then future fiscal events are likely to involve a less pleasant set of announcements over the extent to which taxes need to rise to restore the health of the public finances.’

Britain’s public debt is already larger than the size of the economy for the first time in almost 60 years, after the Government borrowed a record £55billion in May to combat the crisis. This pushed the total debt to almost £2 trillion.

Mr sunak assured MPs he would set out plans to grapple with the public finances when he delivered his Autumn statement.

he said: ‘i can tell the house we will produce a Budget and spending review in the autumn. And we will deal, too, with the challenges facing our public finances. Over the medium-term, we must, and we will, put our public finances back on a sustainable footing.’

The assurance came as the Treasury outlined the staggering cost of measures taken to rescue millions of jobs and businesses devastated by the coronavirus crisis. According to the latest forecasts from the OBR, the Government’s flagship Job Retention scheme and the self Employment income support scheme are set to cost £69 billion.

The Job Retention scheme, which closes at the end of October, is paying the wages of 9.4million furloughed workers and has cost £27.4 billion so far.

The cost of bailing out firms with a combination of grants, business rate holidays and sick pay rebates for staff off sick or quarantining with coronavirus, is set to hit £30.3billion. in total, the direct support for the economy has hit £158.7billion. The Chancellor said new measures announced yesterday were set to cost up to £30billion on top of this.

Experts warned that the Chancellor may have to make more unpopular announcements in the near future. sarah Coles, personal finance analyst at hargreaves

Lansdown, said: ‘All of these measures will cost money – on top of the eye-watering sums already spent – and eventually, the Treasury is going to need to start raising revenue. it means that as early as the autumn Budget we could see proposals and consultations emerge that promise more pain ahead.’

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‘A less pleasant set of announcements’