Britain to roll out record £400-bn public debt plan soon

Published on November 21, 2020 11:39 PM AEDT

Britain to roll out record £400-bn public debt plan soon

Summary

Higher infrastructure spending on cards
New priorities for education, housing, trade, and transport are also likely

Rishi Sunak, Chancellor, UK Treasury will be announcing the largest public borrowing program in the British history since the second world war next week. It will take the total value of government borrowings for this financial year to £400 billion.

It will amount to almost 20 per cent of the nation’s GDP which is double the peak of 10 per cent attained during the 2008 financial crisis.

The nation has already borrowed a hefty sum of £215 billion from April to October this year to cope with the unprecedented impact of the pandemic.

The Office for Budget Responsibility would be publishing the new borrowing forecast on 25 November. Sunak is also likely to announce government spending plans for the next financial year.

The total value of the public debt stood at close to a 60-year high value by the end of October, as per latest government statistics.

What will the plans entail?

If media reports are to be believed, Sunak would be freezing the salaries of policemen and teachers in the new plan. Changes in the foreign aid spending are also on the cards.

Higher expenditure would be going into the infrastructure segment, according to sources. It would be targeted to bridge the regional imbalance, as promised by the PM Boris Johnson earlier in his 2019 election win.

The new infrastructure strategy is expected to include programs for fiber broadband, flood defence, and transportation.

Sunak had to abandon its long-term development plans for the UK and undertake emergency short-term measures like the furlough scheme to protect jobs, as the pandemic struck the nation.

New priorities for education, housing, trade, and transport are also on the cards.

The Bank of England has forecasted that the economic output would shrink by 11 per cent this year due to pandemic’s disastrous impact.

Tax rises expected later

According to the think tank Resolution Foundation, tax rises worth £40 billion per annum would be required every till 2024 to stabalise the government’s fiscal situation, given the high expenditure it is forced to take up at present.

The total debt had surpassed 100 per cent of the British GDP by the end of October this year. it was valued at a whopping £2.077 trillion.

The British economy had displayed a better than expected growth of 15.5 per cent for the third quarter from July to September 2020. The quarter’s tax receipts were slightly higher than the previous quarter’s collections, as per latest government estimates. It was driven by higher collections from tobacco and hydrocarbons.

The UK Debt Management Office is also expected to publish its bond sale plans next week. Right now, the financial markets are lucky to be funding the borrowings at record low interest rates, noted the market experts.

The Citi analysis predicted that over the next five years, the UK government would have to borrow over £800 billion more than what was forecasted in March 2020 to sail through the coronavirus crisis.

At the same time, the International Monetary Fund has cautioned national governments to not be overtly concerned about the rising levels of public debt. The fund insisted that the first priority has to be to ensure an effective economic recovery.

Any ongoing job support schemes should not be cut short abruptly. Removing the support measures could have lasting damaging effects, it revealed.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.