The chancellor’s public spending review will be one of the strangest economic statements to be made to the House of Commons since the end of the Second World War. It will indicate a public borrowing requirement for this financial year of around £370bn, a peacetime record and double the scale needed at the peak of the banking crisis in 2008. It brings the national debt to £2 trillion, equivalent to a year’s GDP. Next year is likely to be better, but how much better depends on such uncertain factors as vaccines, Brexit and fragile business and consumer confidence.
In one respect, the chancellor has an easy job. The sheer scale and immediacy of the pandemic, like a war for survival, leave a government with no choice other than to spend and borrow freely. In this emergency, thus far, the government has been able to fund its deficits via investors and the creation of money at the Bank of England, and with none of the usual fearful consequences for inflation. Interest rates remain at the historic lows first set over a decade ago.
Yet even in these circumstances there are choices to be made, and the early spin is that they are not necessarily wise or fair.
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