The Chancellor said it was not possible to protect everyone from the rising cost of living in his spring statement last week.
28 March 2022
Chancellor Rishi Sunak has said it would have been “irresponsible” for the Government to have borrowed more to raise benefits in the face of rising inflation.
Appearing before the Commons Treasury Committee, Mr Sunak defended the choices he had made in last week’s spring statement.
The committee chairman, Conservative MP Mel Stride, said the Chancellor had done “very little” for those who were out of work and relying on benefits.
Mr Sunak said: “If someone’s view is Government can or should make everybody whole for inflation – particularly inflation at these levels caused by global supply factors – then that’s something that I don’t think is doable.”
He said that raising benefits by the current rate of inflation – which is forecast to rise to more than 8% – rather than what it was last September, would have added £25 billion to Government borrowing in the period up to 2026-27.
He said that “irresponsible” borrowing levels risked stoking inflation even further, adding to the pressure on living standards.
“We are already forecast to borrow in this coming year about 60% more as a percentage of GDP than our post-war average, 20% more as a percentage of GDP than we were forecast to borrow in October, so it is already a significant amount of borrowing,” he said.
“My view is an excessive amount of borrowing now is not the responsible thing to do.”
Mr Sunak said his decision to announce he intended to cut the basic rate of income tax from 2024 would inject “discipline” into the debate about public spending levels.
“Now having something to aim for means that hopefully we can have a more disciplined conversation about incremental public spending at this point, which is already at very high levels,” he said.
“My priority at this point forward is to keep cutting taxes, not increased public spending.”