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Thu, 16 July 2020

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Coronavirus: George Osborne warns Boris Johnson he will have to make ‘hard choices’ as borrowing soars to record level

Coronavirus: George Osborne warns Boris Johnson he will have to make ‘hard choices’ as borrowing soars to record level

Boris Johnson and George Osborne

4 min read

George Osborne has warned Boris Johnson he will need to make “hard choices” on public sector spending as borrowing soared to its highest monthly figure on record.

The former chancellor, who imposed sweeping cuts to state spending in the wake of the last financial crash, said the Government would need to spell out a plan for “what we want, what we can afford and what we’re prepared to pay” to avoid losing the confidence of international markets.

The intervention from the Conservative former finance minister came as the Office for National Statistics confirmed that the Government borrowed a record £62.1bn in April.

The figure was described as “pretty much unprecedented” by the ONS’s deputy national statistician Jonathan Athow, who pointed out that borrowing is now “about six times what it was” in the same month last year.

Total public sector debt meanwhile rose to £1,888bn at the end of April - £118.4bn higher than at the same point in April 2019.

Reacting to the figures, Mr Osborne told the BBC: “These numbers are striking but they’re not a surprise. 

“And of course, they reflect the fact that there’s a lot of emergency, one-off spending - quite rightly, on things like the furlough scheme and loans to small businesses.”

But the former chancellor warned: “We have to come to terms with the fact that Britain, like every other country, is poorer than we thought it was going to be and our economy is smaller than we thought it would be.

“And that I’m afraid, will lead to hard choices about what we can afford, how much we want to spend and how many taxes we want to raise to pay for it.”

'Government must continue to support workers and firms, not only during the lockdown phase, but also to deliver the strong recovery that needs to follow' - The Resolution Foundation

Boris Johnson has already rejected calls for wide-ranging public spending cuts once the immediate Covid-19 crisis has passed, telling reporters last month that austerity  will not be “part of our approach”.

But the Treasury has already briefed ministers on options including a rise in income tax, a freeze on public sector pay and an end to the Conservatives’ flagship pensions ‘triple lock’ policy as it grapples with the cost of the coronavirus fight.

Mr Osborne warned: “In the next two or three years markets, and indeed the country, will look to governments - and indeed oppositions who want to replace those governments - to set out plans for how they are going to bring balance eventually back to the public finances.

"And, crucially, make these decisions, which I’m afraid we all have to face as a society, about what we want and what we can afford and what we’re prepared to pay.”

He added: “Certainly my experience in 2010/11 - I came in as chancellor a couple of years after the money had been spent, a lot of it, during the financial crash - the markets started to look to Britain and indeed other countries in Europe to see whether we could afford what had been spent. 

“For me the priority was setting out a long-term path, instilling confidence, legislating for difficult decisions that didn’t necessarily have to take effect that moment but would take effect over the coming years.”

'GETTING A GRIP ON EVENTS'

Pressed on the Prime Minister’s insistence that austerity should not form part of the Government’s response, Mr Osborne - who left office in 2016 in the wake of the Brexit referendum - said: “Right now I support what Rishi Sunak and Boris Johnson and others are doing to sustain the economy during this extraordinary period.”

But he said of his own time in office: “I think Britain recovered more quickly than others, created more jobs than anyone else, and actually had less austerity than most countries precisely because we actually embaraced the plan, we instilled confidence... that we knew what we were doing and we were getting a grip on events, rather than being pushed around by them.

"I hope that this government will do something similar.”

Commenting on the borrowing figures, Charlie McCurdy of the centre-left Resolution Foundation think tank said they offered “a stark illustration of the fiscal costs of coronavirus and the lockdown measures required to contain it” - but there were “no signs that the Government is struggling to find the cash”.

“Record low interest rates mean the UK’s higher debt burden should remain more than manageable,” Mr MrCurdy added.

“It would therefore be wrong to reduce coronavirus support measures prematurely.

"Government must continue to support workers and firms, not only during the lockdown phase, but also to deliver the strong recovery that needs to follow.”

The comments came as separate figures from the ONS revealed that British retail sales tumbled by a record 18.1% in April as shops closed their doors during the Covid-19 shutdown.

Clothing sales sank by 50.2% - while online shopping climbed to make up 30.7% of all retail transactions.

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