Rishi Sunak was accused today of being “overly optimistic” and saying he may need to find more money to take action against Covid-19, despite having spent “really amazing” amounts to keep the UK economy alive.
The Chancellor announced yesterday that borrowing would be nearly £ 400 billion this year, with government spending exceeding £ 1 trillion for the first time.
In its official forecasts yesterday, the Office of Budgetary Responsibility (OBR) warned that until the next election the Chancellor would need tax increases or spending cuts of at least £ 21 billion and possibly up to £ 46 billion a year to keep debt from spiraling out of control devices .
However, some have questioned whether the chancellor was too optimistic – because he stopped spending on fighting Covid-19 after the end of 2021, according to the Institute for Fiscal Studies. Others asked why he didn’t mention Brexit at all.
IFS Director Paul Johnson said, “Rishi Sunak has spent a truly amazing amount of money this year and plans to continue doing so next year in response to Covid.
However, this was a spending review in which he reduced planned future spending and saved more than £ 10 billion per year from department spending plans for the next year and years to come.
“Even after the next year, he did not provide anything for expenses related to Covid. And these plans assume that the temporary hike in universal credit will not continue beyond this year. Each of these assumptions is questionable.
Chancellor Rishi Sunak, pictured yesterday, is bringing huge sums of money into the economy but has been accused by IFS Director Paul Johnson of forgetting about Covid after 2021 and of not mentioning Brexit at all
The government is projected to borrow at least £ 100 billion each year of the OBR forecast period
By 2025, the UK’s mountain of debt will have reached a staggering £ 2.8 trillion – and still account for more than 100 percent of GDP
The national debt is expected to rise to 2.27 trillion pounds this year and grow to 105.2 percent of the economic size
Rishi Sunak’s Spend Review: At a Glance
- The government has spent an estimated £ 280 billion this year to protect the country from coronavirus.
- The Office for Budgetary Responsibility (OBR) forecasts that the economy will shrink by 11.3 percent this year. This is the largest drop in production in more than 300 years.
- Borrowing for that year was £ 394 billion, the highest in peacetime.
- Rishi Sunak told MPs “this is an economic emergency” and the damage will be “permanent”.
- “Long-term scarring” means that the economy in 2025 will be around 3 percent smaller than expected in the March budget.
- According to OBR, unemployment will peak at 7.5 percent in the second quarter of 2021 as 2.6 million people are unemployed.
- Public sector wage increases will be “halted” in 2021, but more than a million doctors and nurses will receive a raise, as will the worst.
- The 2.1 million public sector workers who earn below the average wage of £ 24,000 are guaranteed a wage increase of at least £ 250.
- The Chancellor said there were differences between public sector and private sector wages, adding that it could “not warrant significant general recognition for government employees”
- The national minimum wage will rise 2.2 percent to £ 8.91 an hour, including for those over 23.
- The budget for foreign aid, which was cut from 0.7 percent to 0.5 percent in 2021, will return to a higher level “if the budget situation permits”.
- UK Infrastructure Bank founded in Northern England, which will start operations in the spring
- £ 4 billion leveling-up fund for local projects in cities across the country
“It is more than likely that spending will be significantly higher than indicated today, and therefore borrowing will be significantly higher than the OBR’s forecast of £ 100 billion in 2024-25. Either that, or we’re facing pretty tough years again, or big tax hikes. “
The Chancellor unveiled his crucial spending review, stating that billions of pounds are being spent getting the unemployed back to work and strengthening infrastructure, the NHS and defense to create a platform for recovery.
In bloody news of the problems ahead, when he announced that the immediate response to the crisis had cost £ 280 billion, Sunak told Commons, “Our health emergency is not over and our economic emergency has only just begun.”
All hopes for a V-shaped recovery from the pandemic went out of the window with the OBR’s assessments.
While the watchdog expects production to have slumped 11.3 percent this year, it will only grow 5.5 percent next year, 6.6 percent in 2022 and 2.3 percent in 2023. Susannah Streeter, senior analyst at investment platform Hargreaves Lansdown, said: ‘This is a brutal assessment of the economic damage that Covid-19 has wrought.
“But desperate times need desperate action, and sustainable government spending is critical to helping the economy emerge from the abyss.”
A beam of light was included in the OBR’s projections – it was predicted that fewer people would lose their jobs than was forecast in the summer. The watchdog expects unemployment to peak at 7.5 percent by June next year. However, this still means that around 2.6 million people are unemployed.
Mr. Sunak said of yesterday’s spending review, which set out the next steps for the country’s finances, “Our health emergency is not over and our economic emergency has only just begun.”
The pandemic will permanently “scar” the economy and blast a gaping hole in public finances, an official watchdog warned yesterday.
In a dismal series of forecasts, the Bureau of Budgetary Responsibility said national production will shrink 11.3 percent this year – the largest decline in three centuries. It won’t return to its pre-virus levels until late 2022.
According to the central forecast, growth will return next year, but there it will take until the end of 2022 to reach pre-pandemic levels
The Rising Cost of Eat Out To Help Out: Rishi Sunak’s taxpayers have £ 849 million
Rishi Sunak’s Eat Out To Help Out program to support hospitality businesses cost taxpayers £ 849 million after a surge in budget, shock figures showed today.
The Treasury Department estimated the program to offer a meal discount to encourage people to go out for lunch and dinner in August would cost £ 500 million.
But that mark was exceeded by 70 percent after more than 49,000 companies filed claims for more than £ 160 million meals, statistics from HM Revenue and Customs showed today.
The majority of claims – 55 percent – were made by restaurants, with pubs accounting for 28 percent of meals.
The government data showed that the number of meals discounted by the system and the total value of entitlements increased each week as more people took up the offer each week before it ended.
It is believed that an astonishing 36 million meals were eaten on Bank Holiday alone to bring the price down for good.
It also found that customers received an average discount of £ 5.24 per meal they used.
Of the claims made, 93 percent came from small businesses with only one participating point of sale. They made up 52 percent of the total discount.
Less than 1 percent of the claims came from companies with more than 25 points of sale, but those companies accounted for 34 percent of the meals requested and 27 percent of the total rebate requested.
The three years of lost growth will lower living standards and increase unemployment, he added. By the end of the OBR’s forecast period in 2025, the economy will still be 3 percent below expected if the pandemic had not occurred.
The permanent “scarring” is caused by companies giving up their investments, others collapsing completely, and workers getting by on lower wages. With national debt at its highest level since the war, national debt will continue to rise over the next five years, reaching £ 2.8 trillion by 2025/26.
The OBR’s main predictions were based on a vaccine that did not become generally available until mid-2021 and severe restrictions that remained in place until then.
The watchdog admitted last night that he wrote his predictions before the news of the AstraZeneca rush broke. This means that the best-case scenario, in which a vaccine will be launched from next spring with fewer restrictions until then, is now more likely.
Assuming this, the economy could return to its pre-virus peak by the end of 2021 and scarring could be avoided.
The OBR said: “The coronavirus pandemic has caused the world’s economy the greatest peacetime shock in its history.
“The UK economy has been relatively hard hit by the virus and the public health restrictions required to combat it.
“The virus has also put a heavy strain on public finances. In our key forecast, this year revenue will be £ 57 billion lower and spending £ 281 billion higher than last year. “
National debt will be £ 394 billion this fiscal year, which is 19 percent of national income.
This is the highest level since 1944-1945 and close to the high of 27 percent in World War II. The Treasury Department will continue to borrow £ 100 billion per year at the time of the next election in 2024.
The national debt is expected to rise to 2.27 trillion pounds this year and grow to 105.2 percent of the economic size.
Mel Stride, Tory chairman of the Commons Treasury Committee, said tax hikes were inevitable to fill the huge gap in public finances. He urged Chancellor Rishi Sunak not to make any major decisions until economic activity recovers.
The MP added: “The government has done a good job of getting us through this crisis. However, some of the expected tax decisions might feel uncomfortably close to the choice. “