Amid a growing row over how Chancellor Rishi Sunak will restore Britain’s shattered public finances, Lord Hammond told Times Radio: “I’m afraid whatever politicians choose to say, the truth which will be borne out by the experience of the next few years is that we are going to do more borrowing, more taxing and a bit less spending.”
He compared the devastating blow from Covid-19 as “probably most akin to fighting a war”, leaving the country in a “perilous” situation given the economic shock which he believes mean that the Government will not be able to meet all its previous spending commitments.
“Alongside measured tax increases, there will have to be a more measured approach to what we can afford in terms of public spending,” he said.
“It may be for example that some of the capital projects that the Prime Minister has talked about, capital spending projects on infrastructure, instead of being funded by government, we need to look at ways of getting private investors, private sector to invest in those infrastructure requirements of the country in order to allow the Government to use its funds to meet public services needs.”
He stressed that the Government would be reluctant to break core manifesto commitments: “But the truth is what we have gone through is probably most akin to fighting a war,” he added.
“It’s something we did not expect to happen, we did not have any choice about it, it came along and we had to deal with it, and I think the majority of people in this country will understand that this is not something that the Government could have anticipated and when the Government made commitments before the Covid crisis it made those commitments in perfectly good faith but the world around us has changed and when the world around you changes a sensible person changes their plans.”
He emphasised that he strongly supported Mr Johnson’s levelling-up agenda, for both social and economic reasons.
“One of the ways to grow the UK economy faster and with more resilience is to get economic growth more evenly spread across this country,” he explained.
“But that does not necessarily mean investing in huge infrastructure projects.
“Many of the things that will drive higher economic growth, particularly in parts of the country, in the North and the Midlands that have suffered so over the last few decades, are around the way we deliver things like education and skills.
“It may require a bit more money but it’s about a lot more than just building grand infrastructure projects.
“It’s about thinking about the way we organise and deliver public services.”
Devolving power more effectively would be key, he added, to city areas so they can organise public services for their communities.