Rishi Sunak insists UK will not return to austerity
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The Chancellor is looking to using his budget to scale back the mounting debt created by the coronavirus pandemic. Currently, debt sits at around 100 percent of GDP, the highest rate since World War Two.
There are concerns in the Treasury that a rise in inflation and interest rates will lead to an eye-watering rise in the money owed by the UK.
Mr Sunak warned in March: “Just a one percentage point increase in both would now cost us over £25billion.”
In August, inflation rose by 3.2 percent, the highest level since 2012.
Under new rules, Mr Sunak is thought to be considering, Government debt would be required to start falling by 2024-25.
The Treasury’s previous fiscal rules were suspended during the pandemic.
A spokeswoman from the department said: “The fiscal framework remains under review and no decisions have been taken yet.
“We’re committed to keeping the public finances on a sustainable footing, which is why the Government is taking action to keep debt under control in the years to come.”
Tories fear they risk losing their image among the public as being the party of fiscal discipline, that can be trusted with the economy.
With the coronavirus crisis requiring unprecedented levels of public spending, the Chancellor has been forced to take action rein in costs.
Last week, the Conservatives broke their election pledge not to raise national insurance tax in a bid to raise extra funding for the NHS backlog caused by the pandemic, and to fix the social care crisis.
On the same day, ministers also unveiled a one year suspension to their triple lock pensions pledge.
The lock means the state allowance is due to rise by inflation, cost of living or average wages, which ever is higher.
But with fears average earnings could rise by as much as eight percent due to distortions caused by coronavirus, state pensions will now only rise by inflation or cost of living.
Polling by YouGov following the announcements saw the Conservatives slump by five points to 33 percent, behind Labour of 35 percent, although a survey by the same company this week suggested the Government has bounced back.
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“Read my lips, the Tories can never again claim to be the party of no tax,” Labour’s Sir Keir Starmer declared in the Commons last week.
At PMQs on Wednesday he once again attacked the Conservatives’ record on the economy.
He said: “Taxes on working people up, national insurance up, council tax up, energy bills, food prices, burdens on families, up, up, up.
“This afternoon he has the chance to change course to vote with Labour to cancel the cut to Universal Credit and then stop clobbering working people with unfair tax rises.”
Labour MPs joined in chanting “up, up, up” as their leader attacked Boris Johnson.
Backbench Tories have been left concerned by tax rises and broken manifesto promises in recent weeks, fearing it will come back to haunt them at the next election.
Steve Baker, a former minister and current member of the Treasury select committee, said last week: “The Conservative Party, at some stage in our lifetimes, is going to have to rediscover what it stands for because I have to say at the moment we keep doing things we hate, because we feel we must.”
Addressing Tory MPs at a champagne reception earlier this month Mr Sunak admitted it was going to be a “tough autumn” but urged colleagues to stick by the Prime Minister.
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