UK finance minister Rishi Sunak, battling record deficits and soaring debt due to his government’s emergency coronavirus response, faces a politically dangerous balancing act to pay the bill, analysts say.
As the outbreak raged, total public debt rocketed above £2.0 trillion for the first time, striking a record high proportion of 102 percent of gross domestic product (GDP).
Commentators argue that a combination of taxation, inflation, spending cuts, and even economic growth could help balance the books for Sunak.
But the public purse also faces the additional threat of a potential no-deal Brexit at the end of this year.
Public sector net borrowing — the state’s preferred measure of the deficit — hit a record £173.7 billion in the first five months of its 2020-2021 fiscal year, or April to August.
That was an eye-watering £145 billion more than the year-earlier figure.
‘Unavoidable’ tax hikes
“It is unavoidable that taxes will rise… but the right decision is to not raise taxes now,” Warwick University economics professor Arun Advani told AFP.
“It is hard to predict when — it will depend on the pandemic. If we see a winter not as bad as the spring, then end of March 2021 could be the time to… lay out an economic plan.”
Chancellor of the Exchequer Sunak, a rising star in Conservative Prime Minister Boris Johnson’s administration, has so far pumped billions into virus-related health spending and jobs support schemes.
Last week he launched a new coronavirus jobs protection initiative that will support wages of staff keeping at least one third of their usual working hours.
But the plan is dwarfed by the current generous furlough scheme, which is due to end next month after paying