Sunak and Johnson strike deal to wean government off borrowing

Prime minister Boris Johnson and chancellor Rishi Sunak have brokered a deal to wean the government off borrowing to finance spending.

Any new spending announced at the upcoming budget and spending review must be financed by reductions in spending elsewhere or tax hikes, Johnson has reportedly agreed to.

The news was first reported by The Sunday Times.

The pair have agreed to tighten the fiscal belt now to avoid having to raise taxes in the run up to the next general election in 2024.

Sunak has allegedly been on a charm offensive in a bid to persuade Tory MPs the government will be able to slash taxes if they embark on fiscal restraint now.

Sunak will deliver his next spending review and budget on October 27.

The news comes as a group of Conservative MPs have broken ranks and slammed Johnson’s decision to raise national insurance by 1.25 percentage points, according to reports in The Guardian.

“The challenge for the government at this conference is to square the circle of how you can level up deindustrialised and poorer communities in the north of England while at the same time taking cash out of their pockets through a national insurance rise and cuts in universal credit,” said Jake Berry, MP for Rossendale and Darwen.

The criticism comes as concern about a cost of living crisis pinching Brits’ pockets are mounting. 

Fuel and energy prices have skyrocketed due to supply chain breakdowns, while the government is set to repeal the £20 universal credit uplift this week. Inflation, which reduces real incomes, is expected to rise above four per cent, according to the Bank of England.

Research by the Resolution Foundation found 312,000 working families in the Greater Manchester area – where the Conservative Party conference is being held – will be hit by the universal credit cut.