Government spending under Rishi Sunak could cross the £1 trillion mark by 2023-24, says a new report.
The chancellor was likely to push spending to 40 per cent of GDP, going past the scale of public expenditure under former prime minister Tony Blair.
The Resolution Foundation, which released the report titled ‘The trillion pound question’ on Monday (24), said the March 11 Budget would signal “a big shift for a traditionally small-state Conservative Party”.
Sunak would be spending up to £100 billion on big-ticket infrastructure projects and increasing day-to-day spending.
He was said to be under pressure to go easy on his former boss Sajid Javid’s stringent budget rules, which included the government balancing its budget for day-to-day spending by 2023.
The report assessed that initiating the process of “reversing austerity” in government departments that cut up to 30 per cent expenditure since 2009-10 was likely to cost the Treasury at least £24 billion, said the report.
Incidentally, Sunak was planning to establish an “economic decision-making campus” in the North, which stood to gain the most from his splurge. About 1,500 jobs would be shifted to Teesside.
The think tank’s report recalled that Sunak had earlier cautioned against government spending exceeding 37 per cent of the GDP.
In 2015, he told the House of Commons: “That [37% of GDP] is the best estimate of our income as a government and therefore the best guide to what we can afford to spend.
“We all know what happens when those facts are ignored: more borrowing, more debt.”
Borrowing was likely to increase from £41 billion in 2018-19 to £64 billion by 2021-22.
Economist Jack Leslie of the Resolution Foundation warned that “higher spending will require higher taxes”.
“The Chancellor's big spending plans to ‘level up’ the country through infrastructure projects will lead to a bigger state than at any point under Tony Blair, and marks a big shift for a traditionally small state Conservative Party.
“But new roads and rail lines are only part of the story for a Government wishing to turn the corner on a decade of austerity.
“If the Chancellor wants to increase spending on day-to-day public services in a fiscally responsible way he will have to change another of his party's traditional priorities–lower taxes.”
