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UK finance minister signals huge response to virus crisis in Budget
FINANCE minister Rishi Sunak signalled the UK's fiscal rules could be ditched as he prepares a massive package of measures to tackle the coronavirus crisis.
In television interviews on Sunday, Mr Sunak signalled he's weighing up higher borrowing as he finalises proposals to shore up the economy and help businesses in Wednesday's Budget.
"We need to make sure that we respond at scale to whatever scenario comes our way - I can commit that we will do that," Mr Sunak told the BBC's Andrew Marr Show. "I know that we will get through it."
The Budget was meant to be the landmark moment Boris Johnson's new government unveiled its great vision, with ambitions for a massive increase in infrastructure spending to revive "left behind" regions of the UK. Instead, Mr Sunak, the Chancellor of the Exchequer, has been forced to re-write his fiscal statement in the face of the virus outbreak, which is spreading in the UK and has upended markets around the world.
Mr Sunak said there was a strong macroeconomic debate about the UK's opportunity to borrow more. "Interest rates are very low, and they have been very low for a while," he said. "Of course I am engaged with those debates as you'd expect me to be."
Mr Sunak was asked repeatedly whether he would commit to keeping the fiscal rules he inherited from his predecessor, Sajid Javid, last month. The rules require day-to-day spending and revenue to be in balance or surplus in three years, and even before the crisis there were doubts that they could be met without tax increases or further cuts to public spending.
The chancellor acknowledged that the official forecasts that will accompany the Budget risk being left behind by events. The Office for Budget Responsibility completed its baseline estimates, which do not take into account government policy, in February, before it was clear how quickly the virus would spread. There could be more "volatility" around those forecasts in the short term, Mr Sunak said.
He said the economy and the public finances were strong after years of belt tightening, meaning the government can take "whatever action is required" to help tackle the crisis.
Mr Sunak, Mr Johnson and Bank of England governor Mark Carney have held talks over the response to the threat the virus poses to the economy, fuelling speculation about the possibility of coordinated action including interest-rate cuts this week.
"It's because successive Conservative governments have been fiscally responsible that we are able to respond in scale to the challenge we are facing," Mr Sunak said. BLOOMBERG