Sunak faces tough choices, but our recovery starts here

IF THE first stage in the battle against Covid-19 is slowly drawing to a close, the second has yet to begin.

For as the smoke clears, we will have to take stock of the destruction this terrible virus has inflicted on our livelihoods as well as our lives.

Our first day of reckoning will be next Wednesday when the Rishi Sunak delivers a Budget like no other. He is expected to deliver a firm pledge to lead Britain out of the economic shadows, a clear plan for how that will be done and an appeal to our resilience to work together and help our economy return to full health. In short, it will be our roadmap to recovery.

And, just as the Prime Minister levelled with the public about the need for caution on our road to freedom, the Chancellor will deliver an honest assessment about the long and difficult road ahead. But he will also stress we will not be making the journey alone.

Just as the Treasury held the economy afloat as Covid swept in, it will continue its support as the tides recede.

At the start of the pandemic the Chancellor promised to do whatever it took to prevent wholesale economic collapse and that meant spending on a scale fitting for a country at war – to date a staggering £280billion. And the life support machine won’t be switched off at the end of March, it will continue in parallel with the roadmap out of lockdown. But beyond the support package, this is the Budget where the Chancellor should start the work on filling the £40billion hole in the public finances. There are no easy choices.

He needs to not only plug this gap but continue to make good on the Government’s £100billion commitment to invest in infrastructure – crucial in the creation of growth and jobs – raise school standards and to continue to invest in public services. No matter what Labour claims, austerity will not be the price we pay for Covid-19.

There are concerns that once the brakes on our freedoms have lifted, pent up demand will turn into high consumer spending. That, in turn, could see inflation rise and the Bank of

England could be forced to raise interest rates. On current borrowing levels, and with two thirds of public debt index linked, even the smallest interest rate rise could make servicing our debt significantly more expensive.

So the debt burden must be tackled and it should be shared fairly among those who can best afford to carry it – big business and middle and high income earners.

Personal allowances are likely to be frozen next year, with corporation tax set to increase from 19 per cent to at least 23 per cent, a figure more in keeping with our G7 counterparts.

But there is no doubt that this Chancellor wants to ensure Britain makes the most of the opportunities of Brexit and remains a highly competitive and attractive place for business. This Budget is not the time to implement this tax rise. What is needed is clear and timetabled staging posts, similar to those we have for easing restrictions.

In a decade of Conservative rule and fiscal responsibility, Britain went from being one of the worst prepared countries to withstand an economic shock to one of the best. That ensured that when Covid struck, Rishi Sunak had the room to devise and deliver an unprecedented support package.

The Government faces tough choices and any new economic measures will not always be popular but they will be necessary. We don’t know what economic shock will come next, but we do know we will be ready.