Sunak will announce later Wednesday that emergency aid measures for workers and businesses will be expanded, while the case is decided that public finances should be restored once the country’s rapid vaccination by the country has eased the economic pain caused by the coronavirus pandemic.
The British government has borrowed huge sums over the past twelve months to finance almost £ 300 billion ($ 419 billion) in fiscal stimulus. Total government debt has risen to £ 2 trillion ($ 2.8 trillion), or almost 100% of GDP, a level not seen since the 1960s, according to the Office for National Statistics.
“We are using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people,” Sunak will say, according to excerpts from his speech. Treasury. “Once we’re on the road to recovery, we’ll have to start fixing public finances – and I want to be honest today about our plans to do that.”
UK GDP fell by almost 10% over the course of 2020, which would return the economy to its 2013 level. A continuous nationwide exclusion imposed on 5 January is expected to hit the economy hard in the first quarter of 2021, while the disruption of EU trade after the Brexit transition period on 31 December also weighs on activity.
While Sunak is not expected to announce immediate plans to recover spending on Wednesday, tax increases could be on the map to fund additional stimulus measures that cost billions of pounds, including a third expansion of the government’s job support program and plans to maintain improved welfare payments . in place.
Sunak will promise to keep subsidizing the wages of employees on the lookout until September, with businesses being asked to contribute to the costs from July, according to a statement from the Treasury. The pandemic has already wiped out more than 700,000 jobs and left about 4.7 million people on the state to pay the bulk of their salaries, the government’s data shows.
Sunak, who took over the reins from the Treasury a few weeks before the coronavirus crisis erupted in the UK last March, will also set out plans to channel £ 5bn ($ 7bn) into ‘ restart grants’ to more than 600 000 companies in the hospitality industry. worth £ 18,000 ($ 25,000) each, he told broadcaster Sky on Sunday.
According to various media reports, Sunak could announce an increase in taxes on companies to restore government finances.
Britain’s corporate tax rate is at 19% the lowest in the G7 and one of the lowest among OECD countries. Even if it is increased to 25%, companies in the UK will still have a lower tax rate than in most other major economies.
But a sharp tightening of fiscal policy, driven primarily by higher taxes, could put economic recovery on shaky ground, Capital Economics senior economist Ruth Gregory wrote in a research note last week.
‘The risk is that it will be over the next two years [Sunak] will have the temptation to pull the rug under the feet of homes and businesses by reducing the budget deficit faster than currently scheduled, “Gregory said. It would not only undermine the economic recovery, but it could also cause more problems for the public finances than it solves, ”she added.