Sunak warns of hard choices ahead

Chancellor Rishi Sunak warned there were hard choices ahead as he promised to "balance the books" after the government borrowed heavily during the Covid-19 crisis.

In a short speech to the Conservatives' virtual annual conference Sunak indicated tax increases would be needed to bring down government borrowing. Prime Minister Boris Johnson has ruled out a return to severe spending cuts.

"Through careful management of the economy this Conservative government will always balance the books," Sunak said. "If we argue there is no limit on what we can spend, that we can simply borrow our way of of any hole, what is the point of us? I have not pretended there is some easy, cost-free answer. Hard choices are everywhere."

UK government debt has exceeded £2trn for the first time and exceeds economic output for the first time since 1963 after Sunak borrowed to support the economy during the coronavirus pandemic. The government borrowed more than £220bn in the first five months of the current financial year to support incomes, jobs and businesses.

Sunak has floated the idea of raising taxes but has indicated no such measures are imminent with the economy fragile. Conservative MPs wedded to tax cuts may not like potential tax increases.

Jonathan Portes, professor of economics at King's College London. said Sunak's rhetoric was "performative nonsense" given the Conservatives had not come close to eliminating the deficit during more than 10 years in power.

"This Conservative government has (rightly!) never (even before covid) 'balanced the books' or had a remotely credible plan to do so," Portes said. "Bizarre."

Sunak also played down speculation that he was in line for Johnson's job as frustration with the government's handling of the pandemic and Brexit mounts. He said Johnson had a "special and rare" ability to connect with people and cared about the country.

"On the big calls, in the big moments, Boris Johnson has got it right and we need that leadership," Sunak said.