Budget 2021: Rishi Sunak puts £1.6m into vaccination programme
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Despite announcing an increase in Government spending on the crisis to more than £400billion, one expert claimed the UK is concerned by the impending $1.3trillion (£933billion) US spending package. Following the announcement of the Budget, Kate Andrews former associate director of the Institue for Economic Affairs (IEA) claimed Mr Sunak is trying to make “Britain Biden-proof”. Ms Andrews claimed there is an urgent concern in the UK that Washington’s spending stimulus could cause a spike in interest rates and inflation in the UK.
Writing in The Spectator, she claimed the impending spending package is setting the US up for increases in interest rates.
If this is the case, this will increase the rates on loans, costing the UK billions.
She said: “The worry is that when Biden pours all this free vodka into a post-pandemic party, things could get out of control pretty quickly.
“Larry Summers, who served as Treasury Secretary under Bill Clinton and as an adviser to Barack Obama, is already warning of inflation danger.
“Normally, inflation would be fought by raising interest rates: but that’s a tool that’s simply unaffordable right now, with the UK set to borrow hundreds of billions more in the coming years.
“Like Sunak, Biden plans tax rises to accompany his spending.
“But some say there’s a big difference in Sunak’s case.
“‘He isn’t falling in behind Joe Biden,’ says one senior government official, responding to claims that the Chancellor wants to use the President’s expected tax hike plans to force through a British tax raid.
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“‘He’s trying to make the UK economy resilient to decisions made elsewhere.’
“It’s a polite way of saying that Sunak wants to make Britain Biden-proof.”
On his Budget announcement, Mr Sunak announced the furlough scheme would be extended until October.
He also extended help for the self-employed with additional grants and extension of the £20 uplift for Universal Credit for a further six months.
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Mr Sunak also pledged an additional £65billion to battle covid which takes overall Government support to £407billion.
In 2020/21 the Government has been forecast to borrow £355billion and a further £234billion for 2021/22.
These would amount to the highest amount borrowed since the Second World War.
As Ms Andrews states, interest rates on money the UK borrows is currently levelled at 0.8 percent.
If this rises, however, the UK could be forced to pay a large amount of money on the sums it has already bought.
As reported by The Office for Budget Responsibility (OBR), an increase in a rise in inflation, interest rates or borrowing costs would amount to a further £25billion.
The OBR has also stated unemployment will increase to 6.5 percent by the end of this year.
Overall, the UK’s GDP is expected to grow by 4.4 percent next year and 7.3 percent in 2022.
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