Rishi Sunak Faces No Urgency to Balance Books, Fiscal Watchdog Says
Rishi Sunak Faces No Urgency to Balance Books, Fiscal Watchdog Says
(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak shouldn’t feel under pressure to take immediate steps to repair Britain’s coronavirus-ravaged public finances, according to his own fiscal watchdog.
The comments from Charlie Bean, an Office for Budget Responsibility official, will bolster economists and politicians warning Sunak that he could harm the recovery if he acts too early in a bid to bring down the largest budget deficit in British peacetime.
Bean spoke days after Sunak said he had a “sacred responsibility to leave the public finances strong” and that “hard choices” lay ahead. That was taken as one of his clearest signals yet that Britain faces significant tax increases or spending cuts in coming years.
“One shouldn’t think that there is a great urgency in closing the deficit,” Bean told Parliament’s Treasury Committee on Wednesday. “It is entirely appropriate, given the large and unusual shock the economy has been subject to, for the government to run a large deficit so long as the virus persists.”
The hearing also saw an appearance from newly appointed OBR Chairman Richard Hughes, who cautioned that the increase in borrowing since the crisis had left the U.K. more sensitive to shocks, but added “debt reduction is a long-term game.”
The government has spent tens of billions to support jobs and prop up the economy. That’s pushed the national debt above 2 trillion pounds ($2.6 trillion) and left the deficit on track to reach almost a fifth of gross domestic product.
With the virus spreading again, there’s growing unease in Sunak’s Conservative Party about the debts being stored up for the future. But the pressure on the chancellor remains largely political, rather than financial, with Bank of England bond buyng meaning that yields remain near record-lows.
Bean, a former BOE deputy governor, also warned lawmakers that the U.K.’s recovery, which looked V-shaped until the start of the fall, was likely to be put on pause by a resurgence in the virus and associated restrictions.
©2020 Bloomberg L.P.