Budget 2021: Rishi Sunak sets out spending rules for 'new economy' after COVID - but issues warnings on inflation and tough months ahead

Asia's Tech News Daily
Budget 2021: Rishi Sunak sets out spending rules for 'new economy' after COVID - but issues warnings on inflation and tough months ahead

Chancellor Rishi Sunak has set out new government spending rules as he outlined a budget to prepare for a “new economy” after the COVID crisis.

In his statement to MPs, the chancellor said he would keep the public finances “on the path of discipline and responsibility” with his new rules.

These include underlying public sector net debt – excluding the impact of the Bank of England – falling as as a percentage of GDP.

And Mr Sunak also said that, in normal times, the government should only borrow to invest in “future growth and prosperity”.

“Everyday spending must be paid for through taxation,” the chancellor said, as he set out action to pay back the multi-billion pound spending during the COVID crisis.

The chancellor promised his budget would provide “help for working families with the cost of living” amid the “challenging backdrop of rising inflation”.

He revealed the Office for Budget Responsibility (OBR) expect the CPI rate of inflation to average 4% over the next year.

Mr Sunak said his budget “does not draw a line under COVID” as he warned of “challenging months ahead” and encouraged “everyone eligible to get their booster jabs right away”.

But the chancellor added his budget “does begin the work of preparing for a new economy” after the coronavirus crisis.

The OBR now expects the UK’s economic recovery from the COVID pandemic to be “quicker” than previously thought, Mr Sunak told MPs, with growth revised up from 4% to 6.5% for this year.

In 2022, the OBR expects the UK economy to grow by 6% and 2.1%, 1.3% and 1.6% over the following three years.

And they have also revised down their estimates of long-term “scarring” to the UK economy of the COVID crisis.

The chancellor also told the Commons that the OBR expects a lesser peak of unemployment, of 5.2%, which means “over two million fewer people out of work than previously feared”.

Wednesday’s statement was the third budget delivered by Mr Sunak as chancellor and the second of this year, following his statement in March.

Labour leader Sir Keir Starmer was unable to respond to Mr Sunak’s budget in the House of Commons after earlier testing positive for COVID.

At a cabinet meeting on Wednesday morning, Mr Sunak outlined his plans for the budget and spending review to “deliver a stronger economy for the British people, promoting high skills, high productivity and higher wages”.

According to Downing Street, Mr Sunak told his fellow ministers that “strong public services, infrastructure innovation and skills, and support for working families” would be the “three building blocks” of his budget.

The chancellor “described how the levelling up agenda would be the golden thread that runs through this spending Review and budget”, Number 10 said.

And he stated the budget would prepare “for a new economy post-COVID and is a budget that will take the opportunities leaving the EU has afforded us to deliver substantive reform of our tax system”.

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