Rishi Sunak admits current UK borrowing is “not sustainable”
Rishi Sunak has conceded that the current projections for UK borrowing are “obviously not sustainable”, after the chancellor yesterday unveiled huge economic interventions as part of his winter Spending Review.
Sunak yesterday lifted total government spending on the Covid response to £280bn, as he vouched his commitment to “jobs, businesses and public services”.
The chancellor pledged that capital spending will increase to £100bn next year as the government looks to make a “once in a generation investment” in its infrastructure.
It means government borrowing will rise to its highest outside of wartime to deal with the economic fallout of the pandemic.
Speaking to BBC Radio 4’s Today Programme, Sunak said: “In the midst of a crisis it’s absolutely right that we take the action that we have done to protect people’s jobs to protect their health, as we get through this.
“But what the numbers yesterday showed is that the projections for borrowing debt are ones which are obviously not sustainable. We can’t carry on at the level that we’re doing this year.”
The Tory MP defended his decision to freeze public sector pay and foreign aid as he warned that the “economic emergency” caused by Covid-19 has only just begun.
Official forecasts now predict the pandemic will spell the biggest economic decline in 300 years, with the UK economy expected to shrink by 11.3 per cent this year.
The Office for Budget Responsibility (OBR) said yesterday that the British economy will not return to its pre-crisis size until the end of 2022.
The OBR predicted that the number of unemployed people will surge to 2.6m by mid-2021, meaning the unemployment rate will hit 7.5 per cent — its highest level since the financial crisis in 2009.
“That’s the thing that weighs most heavily on my shoulders. That’s the priority I have to protect as many jobs as possible, which is why we’ve done all the things we’ve done,” Sunak said this morning.
The chancellor was slammed for his decision not to address Brexit in his Spending Review yesterday, despite Bank of England governor Andrew Bailey warning that the cost of a no-deal Brexit would overshadow the cost of the pandemic.
Sunak today said a no-deal Brexit was “not something that we should sign up to at any cost — the cost is too high”.
He added that it was “clear what the shape of the deal looks like” and that “with a constructive attitude and goodwill on all sides we can get there”.
It comes after European Commission chief Ursula von der Leyen said yesterday that the bloc was prepared for the possibility of a no-deal Brexit, despite “genuine progress” in ongoing Brexit talks.
Time is running thin for the UK to secure a trade deal with the EU ahead of the Brexit transition period deadline on 31 December.
Any deal between Britain and the EU would need to be ratified by parliaments on both sides, meaning the next few days are crucial for any hopes to secure an agreement between the two parties.
Both EU chief negotiator Michel Barnier and British envoy David Frost remain locked in talks over the main Brexit sticking points.
The pair have so far not been able to reach agreements on fisheries, the so-called level playing field, and settling future disputes between Britain and the EU.
A European Commission spokesperson said negotiators have not yet found a deal on sharing access to fishing waters after the post-Brexit transition period ends on New Year’s Eve — in just five weeks time.