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UK national debt hits another record high of more than £ 2 trillion


National debt hit another record high in late August when it continued to surpass £ 2 trillion when Tory MPs called on the government to explain how Britain will pay for the coronavirus crisis following the latest Rishi Sunak bailout.

The Chancellor yesterday presented his winter economic plan, which includes a wage subsidy program to support jobs as a substitute for vacation, as well as further VAT reductions for the hospitality and retail sectors, as well as the expansion of emergency loan programs.

Economists estimated the giveaway could cost £ 5 billion, bringing the total cost of the government's Covid-19 support to potentially around £ 200 billion.

Mr. Sunak indicated that tax hikes will ultimately be needed to bring public finances back to equilibrium, as he said he will have to make "tough decisions" in the future.

But conservative backers want ministers to urgently set their plan for repaying the money when they warned the government that it could not "throw it any further".

The magnitude of the government's coronavirus spending was made clear this morning after the Bureau of National Statistics announced that the UK's national debt hit a record £ 2.024 trillion in late August.

That figure is almost £ 250 billion higher than at the same time last year when borrowing reached 101.9 percent of GDP after £ 36 billion of public sector borrowing in August alone.

Stephen Barclay, Chief Secretary of the Treasury, insisted today that the employment promotion program will encourage employers to keep on hiring, alleging it would be cheaper for companies to bring back one employee on leave than two part-time workers.

He said the rating "does not reflect the fact that many employers value the flexibility of being able to tailor employee hours during the uncertainty of the winter months".

In the meantime, Lord Wolfson, the executive director of Next, warned the UK business community not to get involved in government handouts.

Chancellor Rishi Sunak is under pressure from Tory MPs to outline how Britain will pay for the coronavirus crisis after pointing out tax increases yesterday

The Bureau of National Statistics announced today that public sector indebtedness has continued to surpass £ 2 trillion

The Bureau of National Statistics announced today that public sector indebtedness has continued to surpass £ 2 trillion

The government will pay 22% of wages as Rishi reveals the vacation replacement

Workers will be able to receive 77 percent of their wages for just a third of their regular hours under the plans unveiled by Rishi Sunak today.

The Chancellor presented the Job Support Scheme (JSS), with which the wages of employees in “viable” functions will be “directly supported” for six months from November.

It will replace the Vacation or Job Retention Scheme (JRS), which is slated to end on October 31st.

However, the new system is less generous than vacation, and the Chancellor admits that it was too expensive to continue after October.

Under the new system, workers' wages will receive a maximum subsidy of 22 percent from the Treasury, depending on how many hours they work.

But companies have to pick up the extra 55 percent, compared to 20 percent on vacation.

It has raised concerns that many companies will simply fire their employees instead of taking them on.

Paul Johnson, Director of IFS Think Tanks, said: & # 39; The new Job Support Program represents a significant new government intervention to support jobs during the crisis.

"But it's significantly less generous than the vacation program it replaces – although, notably, the Chancellor gave no indication of the program's likely cost."

“He is trying to find a difficult path between supporting viable jobs and not retaining people in jobs that will no longer exist after the crisis breaks out.

"With employers now having to pay at least 55 percent of their employees' normal wages, it is clear that many jobs will be lost in the months ahead."

Rishi Sunak's new help for companies and jobs at the highest level

  • The vacation program is being replaced with a Job Support Scheme (JSS) to directly support the wages of employees who work at least a third of their regular working hours.
  • Companies pay workers the hours they work. For regular hours that they cannot work, the employer and the Treasury Department both pay one third of their wages, so they receive two thirds of the wages for missed hours.
  • JSS open to companies that have not used vacation.
  • The self-employed income support grant (SEISS) will be extended with a lump sum from November to January next year.
  • It will be worth 20 percent of the average monthly earnings capped at £ 1,875.
  • Second grant for February to April 2021
  • The guarantee period for bounce-back loans has been extended from the current six to 10 years.
  • Interest-free repayment periods of six months and payment holidays are now also available.
  • The VAT reduction from 20 to 5 percent for companies in the hospitality and tourism sectors will be extended until March 2021.
  • Other companies that have deferred VAT invoices under the new payment system can repay them in 11 interest-free payments in the 2021/22 financial year instead of one full payment in March 2021.
  • The tax system for self-assessment "Time to Pay" was extended to January 2022.

National debt surpassed £ 2 trillion for the first time in history in July as the government continues to throw billions of pounds into offsetting the economic chaos caused by the Covid-19 crisis.

That number continues to rise as the pandemic continues with today's ONS and it turns out that the £ 36 billion borrowed this August was £ 30.5 billion more than last August.

It was also the third highest borrowing rate in a month since records began in 1993.

Borrowing for the first five months of this financial year from April to August 2020 is estimated at £ 173.7 billion.

This is £ 146.9 billion more than the same period last year and the highest borrowing in April-August since records began in 1993.

Meanwhile, government tax revenues were hit hard at £ 37.3 billion in August this year, around £ 7.5 billion less than in August 2019.

It is estimated that the central government spent nearly £ 80 billion on daily service in August, more than £ 19 billion more than in August 2019.

The dire loan figures have made Tory MPs more uncomfortable as they urged the government to determine its strategy for paying for the crisis.

A Tory MP said to Politico: "I don't think Sunak had an alternative to doing what he did to avoid poverty."

But they added, "How everything is paid for will be the secret of our time."

Another conservative backbencher said the government needed to release a payback plan sooner rather than later.

"It's not good enough to keep throwing it in the long grass," they said.

Mr Sunak was asked at a press conference on Downing Street yesterday how the UK will pay for the massive government spending this year.

Pointing to possible future tax hikes, he said, "Over time and as the economy recovers, it is imperative that we keep an eye on our public finances and make sure we are in a strong and sustainable position."

He added: “I will of course have to make similar difficult decisions in the future as we are on the way back to sustainability, but for now the priority is to support the economy and do whatever we can to protect people's jobs , and I'll do that go on. & # 39;

Much of the Chancellor's winter economic plan has been broadly welcomed by companies, but there are concerns that massive layoffs will still occur in the months ahead.

Experts said the Jobs Support Scheme was significantly less generous than the vacation program it replaces, and critics claimed it could actually encourage employers to downsize.

Mr Barclay this morning defended the system against proposals that it might actually be cheaper to bring one employee back on leave at half time than two.

He said, “What this does not take into account, a spreadsheet interpretation, does not reflect the fact that many employers value the flexibility of being able to adjust employees' working hours while handling the uncertainty of the winter months and they want the skills and retain the expertise of their job market. & # 39;

The employment support scheme stipulates that workers in “viable jobs” work at least one third of their normal working hours and that they have to be paid as usual by their employer for this work.

The government and the employer each pay one third of the remaining equivalent salary for the hours not worked.

For an employee who works one-third of his normal working hours, the employer pays 55 percent of normal wage costs, while the government charges the employee about 80 percent of his normal wage.

Mr Sunak said yesterday that the UK must face "the compromises and tough choices that the coronavirus brings" and that "in reopening the economy, it is fundamentally wrong to keep people in jobs that only exist while on vacation" .

He received praise from Tory MPs for teaching the nation to learn to live with coronavirus and live without fear.

Former Tory Cabinet Secretary Sir Iain Duncan Smith told The Guardian: “The truth is that our lives are risky and the Chancellor is right. We have to learn to live with Covid, manage it, get through and not kill the economy.

"We have to go back to work, it can't go on forever."

Steve Baker, former Tory Brexit minister, also praised Mr Sunak, saying he "is increasingly profiling himself as a chancellor of both principle and pragmatism that we can rely on to promote our common prosperity".

Mr. Barclay denied Mr. Sunak's comment "without fear" was a suggestion that people should ignore the coronavirus rules.

He told Sky News, “On the contrary. I think what emerges from the Chancellor's message that we have to address health risks in order to protect jobs.

"As a result of people following and abiding by health guidelines, we are also enabling the economy to recover and protecting as many jobs as possible."

The Treasury chief secretary said the chancellor had "been honest with the public that we unfortunately cannot save every job" as some sectors have not received the help they need to stay afloat.

"There is a whole range of business investments going on in these sectors as we protect so many viable jobs where people have been protected first by the vacation and now by the winter package," he told Sky News.

Debt, expressed as a percentage of the UK's gross domestic product, has now reached levels last seen in the early 1960s

Debt, expressed as a percentage of the UK's gross domestic product, has now reached levels last seen in the early 1960s

The green line on this ONS graph shows central government spending for that year, while the blue line shows spending for the last year

The green line in this ONS graph shows central government spending this year, while the blue line shows spending for the last year

"It is right that we also look at the costs to the economy as a whole. There are significant fiscal costs associated with these measures. Therefore, it is right that we should target jobs that are profitable in what is unfortunately a difficult winter."

The government has wondered what exactly constitutes a “viable job”.

Mr Barclay said it was "one that the employer can bring someone back to work".

He told BBC Breakfast, “This really reflects a shift in focus from the first phase, where we vacationed a high of 8.9 million jobs, to the next phase, where we realize we can last longer Living with this virus will be more time than originally thought.

“So, instead of having people home for very long periods of time, we need to take more targeted action to get people back on the job where we can and where we can't and then focus very much on skills the training and how we bring it to other professions. & # 39;

Lord Wolfson warned the UK business community not to bother with leaflets today as he welcomed the loyalty program and said it was time for companies to pay more for wages.

Lord Wolfson said that Next, which has around 10 percent of its employees on vacation, may not even need to use the system.

He told the BBC: “We don't think we need it, but we do believe that there are other sectors that are urgently going to do it.

& # 39; It seems like a very reasonable plan to me. I think it is important that employers start paying a little more for the systems and that workers get a little less – otherwise I think there is a risk that our economy will simply become dependent on it. & # 39;

Lord Wolfson was asked if he thinks downtown is “doomed” and he replied, “I don't think so. I think they need to change.

"It's not that people don't get their hair cut or buy sandwiches or go shopping, it's that they do less of it downtown and more of it elsewhere."

Lord Wolfson's intervention came when former Prime Minister Gordon Brown said he believes Mr Sunak will soon have to rethink his employment plan.

Mr Brown claimed there was nothing in the Chancellor's embassy for the unemployed, those who have universal credit and are looking for work, or young people who are outside of education and have no job.

He also warned that under the Jobs Support Scheme, "it will be cheaper for an employer to have one full-time worker than two part-time workers".

He said the Chancellor needed to reconsider this and suggested that a summit with mayors in the regions, union leaders and the business community would be a good move.

The ex-prime minister, who served as Chancellor in the former Labor government for ten years, told ITV's Good Morning Britain program: “I think he needs to come back with a better budget for jobs.

"I suspect he knows himself this morning that he has to change his actions because we have the health restrictions, but support for the people they are protecting is now being reduced."

Mr Brown also urged the four home states to work better together to slow the spread of the coronavirus and protect the UK economy.

"If you want to solve the unemployment problem or the tests, you really have to work together," he said.

"I think people want governments in all parts of the UK to work more together to get things done."

Mr Brown suggested that it would be better to spend more money now to create jobs, adding, "Of course, if this is an event in a century, we have to say, 'We have to take action now to." prevent worse damage later "."

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