Public Expenditure

(asked on 23rd March 2021) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what plans he has to reduce the deficit projected in Budget 2021 (a) through taxation, (b) from issuing extra currency, (c) from the proposed recovery bond and (d) via other forms of government-issued bonds.


Answered by
John Glen Portrait
John Glen
Paymaster General and Minister for the Cabinet Office
This question was answered on 30th March 2021

Borrowing in 2021-22 is the second highest peacetime level on record, coming only after 2020-21 – it is clearly not sustainable to continue borrowing at record levels indefinitely.

The OBR forecast shows that the medium-term outlook for the public finances has returned to a more sustainable path, supported by the fiscal repair measures set out in the Budget.

For example, the income tax Personal Allowance and higher rate threshold will be uprated in line with CPI as planned in April 2021, then maintained at that level until April 2026. In 2023, the main rate of corporation tax, paid on company profits, will increase to 25%.

Regarding issuing extra currency, the actual demand for banknotes and coins issued into circulation is determined by demand from UK banks and the Post Office – i.e. currency is issued to meet market demand and not to have any effect on the public finances.

Government bonds (called ‘gilts’ in the UK) are issued to finance the difference between Exchequer incomings and outgoings rather than being a tool utilised to reduce government deficits.

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