After the coronavirus crisis, public spending in the UK will eventually become unsustainable and taxes will need to be raised over the next few years to balance books, warned leading economists.
Paul Johnson, director of the Finance Institute think tank, said there is no need to take action immediately, but the government should set a clear path for how public finances will recover.
i Political newsletter blocked out noise.
Ahead of the announcement of Prime Minister Rishi Sunaksone’s annual expenditure review on Wednesday, MrJohnson released a terrifying picture of UK finances.
In an interview with the BBC’s Andrew Marr, he said that in the first half of this year, the United States experienced the largest decline in economic output ever recorded and faced one of the most feared recessions in history.
Johnson said the UK will borrow about 350 billion won this year. This, as a percentage of national income, is more than at any point except World War I and World War II.
We thought of what we saw during the financial crisis, but this is much bigger, he said.
He said that the government is right to support the economy now, adding: If we continue with the spending and tax levels currently gained in small economies in the medium term, not only will borrowings be high, but debt will increase and at some point become unsustainable.
So in the end, I had to put it back and some sort of financial cut. Perhaps it means raising taxes someday.
Prime Minister Boris Johnson leaves 10th place (Photo: Getty)
MrJohnson said the government would not have to do much this year and perhaps next year.
Perhaps you were looking into the mid-2020s, but to do that, he said, you need a clear path.
The big judgment and the incredibly tough judgment is when to take that action. In the short run, Johnson said it could be exactly the wrong sign to give people the impression that this will happen in the months ahead or perhaps next year.
Regarding Brexit, he said the end of the transition period, whether trade negotiations with the EU or not, could have a negative impact on UK growth.
Even the best deal to get at the moment, he said, would have been considered one of the hardest Brexit imaginable three or four years ago when we started seeing this.
That kind of trading will, at best, prevent the economy from growing faster than other methods.
He added: It is worth saying that there is uncertainty about what the impact will be, especially in the short term, especially in the context of the coronavirus.
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