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Interest rates: Rishi Sunak warns they will not 'stay low forever' – affects on inflation

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Interest rates are low across the board at the moment and have been for a number of years. Today, Rishi Sunak warned they cannot stay that way forever as he laid out his 2021 Budget.

 

“Our fiscal decisions are guided by three principles. First, while it is right to help people and businesses through an acute crisis like this one, in normal times the state should not be borrowing to pay for everyday public spending.

“Second, over the medium term, we cannot allow our debt to keep rising and given how high, our debt now is we need to pay close attention to its affordability.

“And third, it is sensible to take advantage of lower interest rates to invest in capital projects that can drive our future growth.

“So the question is, how we achieve that, how we balance the extraordinary support we are providing to the economy right now with the need to begin the work of fixing our public finances.

“I have an always will be honest with the country about the challenges we face.”

Mr Sunak went on to lay out various tax plans for how public spending would be managed over the coming months.

These proposals caught the attention of a number of experts, including Svenja Keller, Head of Wealth Planning at Killik & Co, who said: “By freezing a raft of tax allowances until 2026 Rishi Sunak can claim to be sticking to the Conservative party’s pledge not to raise taxes in headline terms and it may, on the face of it, look like it will have little impact.

“But taking into account inflation and earnings growth, failing to increase allowances will have a real impact on an individual’s net tax position and their wealth.”

Martin Taylor, the Co-Founder Deputy CEO of Content Guru, also reflected on the “Super Deduction” tax break annonuced and how the covid bill could be repaid.

Martin explained: “We have a rebuilding job to do and businesses need encouragement to invest.

“A significant increase in investment allowance will do for the economy what the stamp duty holiday has done for the housing market.

“The UK’s COVID bill has already assumed the size and status of a war debt. Now it should be treated as such, with costs ring-fenced as a war bond and paid down over 100 years.

“This would take the debt out of Britain’s day-to-day flow of taxation and enable an economic recovery that supports entrepreneurialism. “



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