UK Finance Minister Rishi Sunak has said there will be no return to austerity in a spending plan he will announce on Wednesday, even as the coronavirus crisis pushes Britain even further above 2 trillion pounds ($ 2.7 trillion).
Sunak, who has precipitated massive increases in public spending and tax cuts equivalent to about 10% of economic output, said he would announce a “fairly significant” increase in funding for public services.
“You won’t see austerity next week,” Sunak told Sky News on Sunday, saying his priority in the one-year spending plan was to tackle health and economic crises.
More than £ 3 billion will be set aside in additional aid for the health service.
Sunak is also expected to commit to existing pledges to increase spending on police, nurses and schools, the Treasury (Ministry of Finance) said.
Economists believe Britain will borrow around 400 billion pounds ($ 530 billion) this year, or nearly 20% of gross domestic product, the most since World War II.
That would almost double the blow of the global financial crisis, which took a decade to subside, and some lawmakers in Prime Minister Boris Johnson’s Conservative Party want more budget cuts now.
Sunak said the forecast to be released on Wednesday would show “the enormous pressure” on the economy and that now is not the time to cut spending or raise taxes.
“Once we get through this crisis, we need to think more about returning to a more normal path,” he told Times Radio.
In an interview with the Sunday Times, Sunak said he hoped that in the spring, with the progress of vaccines and testing for COVID-19, he would be able to “look forward to” the work of combating public finances.
Although government debt yields remain near record lows, Sunak is expected to announce a freeze on public sector wages on Wednesday to offset some of his spending.
“When we think of public wage agreements, I think it would be quite reasonable to think of these in the context of the larger economic climate,” he said.
Sunak also said he would announce longer-term measures to boost infrastructure spending, part of Johnson’s pledge to expand economic growth to areas that are lagging behind London and the south. is.
The capital investment to be confirmed includes £ 3.7bn for 40 hospitals, £ 1.5bn for colleges and higher education schools and £ 4bn for over 18,000 additional prison places in England and in Wales over the next four years, the Department of Finance said.
Britain also faces the risk of an economic shock if it fails to secure a trade deal with the European Union in time for the December 31 expiration of its post-Brexit transition.
Sunak said the government is keen to get a deal, but the short-term impact of not doing so would be pale compared to the crisis of the COVID-19 pandemic.
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