Jeremy Hunt warns of 'difficult decisions' as British finances worsen

Higher borrowing in response to the pandemic has pushed the British national debt above £2tn

Jeremy Hunt said he was not prepared to borrow more to finance the tax cuts being demanded by some Conservative MPs.

Britain's chancellor of the exchequer, Jeremy Hunt, has warned that the British government will need to take “difficult decisions” in next month’s autumn statement after a sharp worsening of the public finances over the past six months.

Mr Hunt said state borrowing was on course to be between £20bn to £30bn (€34.7bn) higher than predicted at the time of the budget in March — wiping out what little room he had to cut taxes.

He has ruled out fresh tax rises in next month’s autumn statement and hopes to cut spending in a way that minimises the risks of pushing an already flatlining UK economy into recession.

Mr Hunt’s gloomy message from the annual meeting of the International Monetary Fund in Marrakech was accompanied by a warning from the governor of the Bank of England, Andrew Bailey, that UK interest rates were likely to stay high for some time.

“The fiscal position has worsened since the spring and I will have to take difficult decisions in the autumn statement," the chancellor said.

“The main reason things are more challenging is because interest rate projections for all economies have gone up. The UK is not immune to those changes. We are likely to see an increase in debt interest payments of £20bn-30bn and that’s a huge challenge,” he said.

At the time of the UK budget, the Office for Budget Responsibility (OBR), said the chancellor had only a £6.5bn buffer to meet his fiscal rule of having debt as a share of national income falling at the end of five years. Higher borrowing in response to the pandemic has pushed the national debt above £2tn.

Mr Hunt is braced for the OBR to cut its future growth forecasts for the UK economy — which would pile additional pressure on the public finances. “The OBR has been one of the most optimistic about the long-term growth rate among forecasters,” the chancellor said.

Mr Hunt added that he was not prepared to borrow more to finance the tax cuts being demanded by some Conservative MPs and would instead seek to make savings to pave the way for a more generous budget next spring.

“I have to make sure the UK is resilient to shocks going forward,” Mr Hunt said. “Increasing borrowing would be reckless and the wrong thing to do”. 

Mr Bailey said it would be a mistake to get too carried away with the fall in British inflation — which is down from a peak of 11.1% to 6.7% — saying there was “an awful lot left to do”. He added: “The last mile is going to be the hardest to get us back to target." 

Guardian service