The Chancellor hopes to use his budget to reduce the growing debt caused by the coronavirus outbreak. Debt currently stands at around 100% of GDP, the highest level since World War II. The Treasury is concerned that a rise in inflation and interest rates will result in a massive increase in the amount of money owed by the UK.
“Just a one percentage point increase in both would now cost us over £25billion,” Mr Sunak predicted in March.
Inflation climbed to 3.2 percent in August, the highest level since 2012. Mr Sunak is said to be mulling new laws that would force the government’s debt to begin dropping by 2024-25. During the epidemic, the Treasury’s previous budgetary guidelines were suspended.
“The fiscal framework remains under review,” a department spokesman said. “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.”
Conservatives are concerned that they will lose their public image as the fiscally conservative party that can be trusted with the economy. The Chancellor has been compelled to take steps to reign in expenditures as a result of the coronavirus crisis, which has necessitated record levels of public spending.
Last Monday, the Conservatives breached their election promise not to raise the national insurance levy in order to obtain additional funds for the NHS backlog caused by the epidemic as well as to address the social care issue. Ministers also announced a one-year delay of their triple lock pensions plan on the same day. The lock indicates that the state allowance will increase owing to inflation, cost of living, or average salaries, whichever is greater.
However, with predictions that average incomes could rise by as much as 8% as a result of coronavirus-related distortions, state pensions will now only rise in line with inflation or the cost of living. Following the announcements, YouGov polling showed the Conservatives had dropped five points to 33 percent, trailing Labour by 35 percent, though a survey released this week by the same firm suggested the Government had recovered.
Last week, Labour’s Sir Keir Starmer proclaimed in the Commons, “Read my lips, the Tories can never again claim to be the party of no tax,” He criticised the Conservatives’ economic performance again at PMQs on Wednesday.
“Taxes on working people up, national insurance up, council tax up, energy bills, food prices, burdens on families, up, up, up,” he continued.
“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.”
As their leader attacked Boris Johnson, Labour MPs joined in screaming “up, up, up.”
In recent weeks, backbench Conservatives have been anxious about tax hikes and failed manifesto promises, worrying that it could come back to haunt them at the next election.
“The Conservative Party, at some stage in our lifetimes, is going to have to rediscover what it stands for,” Steve Baker, a former minister and current member of the Treasury select committee, said last week. “I have to say at the moment we keep doing things we hate, because we feel we must.”
Mr Sunak recognised that it would be a “tough autumn” while addressing Tory MPs at a champagne reception earlier this month, but urged colleagues to stand by the Prime Minister.