Prime Minister Rishi Sunak should come up with a plan to phase out the phased plan in next month’s budget as conditions allow, an influential think tank said Tuesday. The British economy insisted that it could not adapt to the “new normal” until most emergency aid was reached. Removed.
The Finance Institute said that most support measures should be phased out rather than abruptly stopped. In particular, there was no need to recoup a £20 per share increase on universal credit as the UK’s payroll system remained far less generous than its peers.
However, while more specific planning may be needed for sectors such as aviation, the economy will not be able to adjust properly while the full plan is in place.
Sunak will use its March 3rd budget to present hopes that it will be the final step in the government’s emergency aid to the economy, which has cost more than £250 billion so far. He is faced with requests from unions and business groups to extend job retention plans and other forms of income support to the end of the year, which are due to expire in April.
Observers say the prime minister should prevent a surge in sudden job losses in sectors where it takes time to recover even after social distancing rules are relaxed.
Paul Johnson, Director of IFS, said Sunak “must strike a balance between ongoing support for jobs and businesses affected by closures and stop full-scale support that hinders necessary economic coordination.”
However, the IFS said fiscal austerity was not immediately necessary even if public finances were not on a sustainable basis.
Think-tank published an analysis based on the economic scenario set by the investment bank Citi. It shows that UK borrowing (expected to grow to around £400 billion in 2020-21) could still reach around £130 billion in 2024-25. More than twice the level predicted in last year’s budget.
This is in part because Citi’s predictions suggested that Covid-19 could strain the UK economy, which is more urbanized and socially skewed than elsewhere. But the IFS also said the government’s plans to cut medium-term spending would be unbelievable.
Instead, given the need to catch up with the loss of school education, deal with the massive backlog of non-Corona 19 health care and relieve pressure on local authorities, it is likely that public spending will continue to rise.
According to Citi’s central scenario, public sector net debt will be more than 100% of national income in 2024-25, and even before accepting it, government income will eventually lead to a £60 billion annual tax increase to ensure daily spending. May be required. Spending pressure, IFS said.
But he argued that an immediate tax increase was not necessary. This was partly due to the low cost of borrowing, and partly because of the “great uncertainty” of the projections, with the possibility that government debt would be much lower if it turned out to be stronger than expected.
“It’s likely in the future to calculate in the form of large tax increases, but it’s still not inevitable,” Johnson said.
Instead, the IFS said the budget’s priority should be on policies that support economic recovery from the epidemic and address a legacy of greater inequality. Otherwise, it can hurt young people with very loose monetary policies that can benefit older and wealthy people. .
IFS Deputy Director Carl Emmerson said ministers should pursue tax policies that lead to fiscal consolidation such as extended stamp duty or incentives for business investments that could boost growth in the short term and offset corporate tax increases later. Holidays that can lead to long-term property tax reform.
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