Rishi Sunak ditches Boris Johnson's upbeat three-year comprehensive spending review plan as debts surge
Boris Johnson’s hopes of launching a bold, three-year spending plan to burnish his Government’s post-Covid political agenda were dashed today as the Treasury, struggling under appalling new data on the public finances, scrapped the idea.
As public borrowing hit £36.1 billion last month, the Treasury said the three-year Comprehensive Spending Review had been binned in favour of a one-year review focusing on Covid-19 job support programmes and public services.
The move was widely welcomed in the City as being pragmatic in the face of the uncertainties wrought on Government finances by the crisis.
It comes as a blow to the Prime Minister, who had reportedly been fighting the Treasury over the issue. Companies reliant on defence and infrastructure spending, which were expected to be big winners in the Johnson plan, were also left disappointed.
The total borrowed since April shot up to a new record of £208.5 billion as the cost of Covid-19 support packages hammered the country’s finances.
Spending on projects such as the furlough scheme surged while tax revenues from companies and workers fell sharply. Takings for the Treasury were down £6 billion in September on the previous year with particularly big falls from VAT receipts, business rates and corporation taxes.
The public debt is now £2.06 trillion, or 103.5% of the country’s entire gross domestic product. That marks the highest ratio of debt to GDP since 1960.
Office for National Statistics data showed the state-sponsored furlough scheme, which comes to an end this month, cost £4.9 billion in September alone. The Self Employment Income Support Scheme cost £1 billion.
Overall borrowing, measured as Public Sector Net Borrowing, was estimated at £208.5 billion since April, some £174.5 billion more than a year ago.
The Office For National Statistics said: “The Covid-19 pandemic has had an impact on public sector borrowing that is without precedent in peacetime.”
Borrowing since April is four times the £54.5 billion borrowed in the whole of the previous year, with central government tax receipts and National Insurance contributions down 11.6%.
The Office for Budget Responsibility says in the full year it could hit £372.2 billion — seven times last year’s. However, the country’s plight is being eased by low interest rates, which mean Sunak can finance the debt cheaply.
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