Rishi Sunak has warned of tax rises in the spring as the ‘economic shock’ of the pandemic starts to bite amid unsustainable government spending.
The Chancellor joked about having an elf on the shelf to ensure Boris Johnson was behaving, adding: ‘I should take his credit card away.’
Mr Sunak made the quip as he prepares to reveal his plan to balance the books and lift Britain out of the pandemic in his spending review on Wednesday.
He said that once a vaccine allows for us to return to normality, there will be a tightening of belts to control the colossal spending of the last eight months.
‘People will see the scale of the economic shock laid bare,’ the Chancellor said, prefacing crucial figures on the state of the economy to be published this week.
‘We can see the data every month, and obviously the shock that our economy is facing at the moment is significant.’
The Chancellor made the quip as he prepares to reveal how he plans to start balancing the UK’s books and recover from the pandemic.
The two men are known to have clashed over the best way out of the coronavirus economic quagmire
He hinted that spending cuts and tax rises will have to follow but said it is a ‘question of timing’ while the economy is in difficulty.
‘While that’s happening, absolutely the right thing to do is to support the economy, and jobs are my number one priority, but – obviously – you can’t sustain borrowing on this level indefinitely,’ he said.
Mr Sunak and Mr Johnson have been known to clash on the best way out of the coronavirus quagmire.
But today in an interview with Times Radio, the Chancellor made clear: ‘The credit card thing was very much a joke. We have an incredibly close relationship’.
The PM has moved to over-rule his chancellor in recent days to plough more money into green economic projects and the military.
Mr Sunak has suggested he could impose a public sector pay freeze in his spending review, but insisted the nation will not see a return to austerity next week.
He is due to announce a multibillion pound plan to invest in long-term infrastructure projects and fund the fight against the coronavirus pandemic, on Wednesday.
Mr Sunak insisted it is not the time to impose tax hikes ‘in the fog of enormous economic uncertainty’, but he did not rule out capping the salaries of millions of public sector workers.
He has said some combination of spending cuts and tax rises are anticipated following the crisis but added it is a ‘question of timing’ while the economy is in difficulty.
In an interview ahead of his spending review on Wednesday, he mentioned Rocky, an elf-on-the-shelf toy who comes out every December to make sure his two children are behaving
It comes as Downing Street soared to a record borrowing high of £22.3billion last month, with the UK expected to hit £350billion for the year amid the pandemic.
The Institute for Fiscal Studies previously warned £40billion would need to be raised through taxes and spending cuts in order to pay back the cash.
Paul Johnson, director at the Institute for Fiscal Studies, said the amount borrowed during the pandemic was ‘the most ever outside of the first and second world wars’, but said more may still be needed in the coming years.
He told the Andrew Marr Show that the UK’s position would eventually become ‘unsustainable’ and that taxes would need to be raised, but that this would likely not happen in the short-term.
‘We’re probably looking into the middle years of the 2020s but we need a clear route to doing that,’ he said.
‘We don’t know at what point this becomes unsustainable but as and when it does, and if it does, the consequences really can become dreadful.
‘The big judgment, and it’s a terribly tough one, is when to start taking that action.’
Asked if the public should accept tax increases, Mr Johnson said: ‘I think that’s right.
‘I don’t think it’s right to scare people with the idea that this is going to happen immediately and I think it’s absolutely right the Government is clear it will do what it needs to do in the short run to support jobs and the economy.
‘Getting the message right is really important.’