National debt set to hit nearly £3TRILLION by the next general election as cost of pandemic spirals
The national debt could be pushing towards £3trillion by the time of the next general election as the cost of dealing with the Covid-19 pandemic spirals, the official budget watchdog has warned.
In a bleak report published this week, the Office for Budget Responsibility (OBR) has laid bare the damage the health crisis is doing to the economy and the public finances.
Its ‘central’ projection was for the Government to borrow £372.2billion this year and £899.2billion over the next five years – pushing the national debt above £2.6trillion in 2024-25.
The Office for Budget Responsibility estimates the Government will borrow £372.2bn this year and £899.2bn over the next five years – pushing the national debt above £2.6trillion in 2024-25
But its ‘downside scenario’, where the economy fares worse than feared, includes borrowing of £441.4billion this year and £1.2trillion over the next five years.
That would push the national debt to well over £2.9trillion in 2024-25, and is a major headache for Prime Minister Boris Johnson and his Chancellor of the Exchequer Rishi Sunak.
The next general election is due to take place in 2024 but it could happen earlier than that.
Sunak yesterday admitted ‘tough choices’ lie ahead when it comes to considering what tax changes should be made following the pandemic.
Giving evidence to the MPs on the Treasury Committee, he refused to be drawn on whether the Government would be able to honour the commitment in the Tory election manifesto not to put up income tax, national insurance or VAT.
‘Our ambition is to deliver on all the priorities that we set out but on any questions on future tax policy I can’t comment one way or another. Those decisions are made as always in future budgets,’ he said.
The national debt dates back to the late 17th century and took more than 300 years to reach £1trillion. It stood at around £300billion at the start of this century but smashed through £1trillion in 2010.
The pile hit £2trillion this year after the outbreak of Covid-19. And the surge towards £3trillion comes as the cost of the virus crisis adds up.
As well as spending billions extra on schemes to support jobs, businesses and the health service, the pandemic and subsequent lockdown have triggered the deepest recession in 300 years, hitting tax receipts in the process.
The OBR is warning that receipts over the next five years will be £418.5billion lower than anticipated as recently as March.
The take from income tax and national insurance is slated to fall £165billion due to lower wages and higher unemployment.