Chancellor Rishi Sunak has sent a warning to parliament that his March Budget will contain “difficult” measures designed to put the nation’s finances on a sustainable path out of the coronavirus pandemic.
In an economic update to MPs, Sunak cautioned that the road ahead would be “tough” and said a year into the global health crisis, it was now “time for responsible management of our economy” after the provision of more than £280bn in stimulus measures.
“Our public finances have been badly damaged and will need repair,” the chancellor told parliament. He added that his strategy would involve “taking the difficult but right long-term decisions for our country”.
Sunak’s update contained no additional aid packages, but he noted that the nation’s economy would get worse before it got better. He went on to face a succession of questions about sector-specific aid from MPs representing all parties.
Setting 3 March as Budget day last month, the chancellor said he intended to announce replacement arrangements for the Coronavirus Job Retention Scheme – also known as the furlough scheme – which is due to end on 30 April.
At the time he suggested that the near-two month window would give firms time to plan for their post-furlough-scheme staffing needs and manage redundancies in a considered way.
In November's Spending Review, Sunak controversially introduced a pay freeze for most civil servants and other public-sector workers in 2021-2022, citing a need to be fair to private-sector workers. Office for Budget Responsibility figures published on the same day forecasted the largest fall in economic output for 300 years.
Former international trade secretary Liam Fox yesterday urged Sunak to “resist any calls” to increase public spending in the Budget, because of the state of the public finances.
“This needs to be a private-sector-driven recovery, most importantly by small businesses who will provide the employment and prosperity that we will need going forward if we are to fund our public services in future,” Fox said.
Sunak said the former secretary of state was “absolutely right” .
“Government cannot and should not do everything,” he said. “We can support free enterprise by investing in skills, innovation and infrastructure, but ultimately it will be those small and medium-sized businesses that create the jobs that we desperately want to see.”
Answering a question from Conservative MP for Barrow and Furness Simon Fell, Sunak agreed the nation had to “return to sustainable public finances in order to build resilience to similar shocks in the future”.
The chancellor replied: “My honourable friend makes an excellent and insightful point. This is about resilience in the public finances – he used the word well. We have faced two supposedly once-in-a-generation shocks in the space of 10 years and we do not know what the future holds.
“What we do know is that we want to encounter the next shock that comes along in as strong a position as possible, because ultimately that will enable us to respond in as comprehensive and generous a way as we have here. That is why, over time, we must rebuild our public finances to that position of, as he said, resilience and strength.”