What will Sunak do if his rescue measures fail?

This autumn the Chancellor will set out departmental budgets for the coming years at the spending review, and Sunak hinted yesterday at the need to shore up the country’s coffers.

“We will deal, too, with the challenges facing our public finances. Over the medium-term, we must, and we will, put our public finances back on a sustainable footing,” he said.

Buckley believes that while higher debt levels could be a consideration for officials, the Government is unlikely to be mulling a return to austerity. Ultra-low interest rates have reduced the risk of the debt pile and the UK will be far from alone in having a debt mountain as large as its economy.

Gerard Lyons, a senior fellow at Policy Exchange and Johnson’s former chief economic adviser, says the Government must pursue a “credible pro-growth strategy that allows the debt to GDP ratio to come down steadily”.

“The next battle is to rule out tax rises. We have an environment of low rates and yields that gives him the ability to borrow.”

Lyons says the Chancellor should focus on cutting taxes on income and measures to incentivise the private sector. He adds that government loans to firms may need to be converted into equity or grants, given that many businesses will face a huge debt overhang from this crisis.

The Chancellor’s job is far from done. Sunak’s next package will not only cap off his Covid-19 response but could provide the Government’s roadmap for years to come.

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