Chancellor Rishi Sunak is expected to raise some public spending in his spending review later this week, but tax rises are looming on the horizon.
According to FTAdviser’s sister paper, the Financial Times, tax rises are expected to wait until next year when the chancellor will start to address “the scale of the economic shock” caused by the Covid-19 crisis.
With Mr Sunak’s focus being on avoiding austerity, tax rises rather than spending cuts are expected.
Speaking to the BBC’s Andrew Marr this weekend, Mr Sunak gave an outline of how bad the UK’s public finances were set to be next year but said the issue would need to be addressed later in parliament.
Mr Sunak said: “I can tell you it’s a very difficult picture. The economy is experiencing significant stress.”
He added: “There’s more stress to come.”
According to the FT, Mr Sunak decided that now it is not the time to address the challenges of a budget deficit likely to exceed £350bn this financial year, but he made it clear that “sustainable public finances” were his aim.
Mr Sunak said: “This has been a tough year for us all.
“But we won’t let it get in the way of delivering on our promises — the British people deserve outstanding public services, and we remain committed to delivering their priorities as we put our public services at the heart of our economic renewal.”
Paul Johnson, director at the Institute for Fiscal Studies, has previously suggested that over the next few years, the focus should be on supporting the economy with no tax rises until at least two to three years' time.
The chancellor will give his spending review on Wednesday (November 25), when he is expected to raise public spending significantly on schools and the police.
According to the FT, The Treasury said the government would stick to its plan to raise school spending by 4.6 per cent in cash terms in 2021-22 and stay on track to deliver 20,000 new police officers by 2023.
On health, there are plans to create posts for 50,000 nurses and put funding in place for 50m additional GP appointments a year.
amy.austin@ft.com
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