RISHI Sunak has insisted making decisions to hike taxes or cut spending would not be right “in the fog of enormous economic uncertainty”.

However, the Chancellor did little to disabuse people of the idea that more than five million public sector workers will see their pay frozen for three years, which could raise more than £20 billion and help begin close the financial black hole caused in response to the coronavirus pandemic.

Mr Sunak, who hit the mediawaves ahead of his spending review, insisted his Commons statement on Wednesday would not announce a new wave of austerity.

“You will not see austerity next week,” he told Sky’s Sophy Ridge on Sunday. “What you will see is an increase in Government spending, on day-to-day public services, quite a significant one coming on the increase we had last year.

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“So, there’s absolutely no way in which anyone can say that’s austerity, we’re spending more money on public services than we were,” he declared.

The Chancellor stressed that he could “not comment on future pay policy” but then noted: “When we launched the spending review I did say to departments that when we think about public pay settlements it would be entirely reasonable to think of those in the context of the wider economic climate.

“It would be fair to also think about what is happening with wages, with jobs, with hours, across the economy when we think about what the right thing to do in the public sector is.” This appeared to be a reference to private sector pay, which has fallen during the pandemic.

Later, pressed on whether he had concerns on limiting borrowing - since the start of the financial year in April it has reached £215 billion, £169bn more than a year ago - he told Times Radio: “I do but there’s an appropriate time to get public finances on a sustainable track. Right now, the right economic response is to focus on tackling the virus. It wouldn’t be right to try and make them now in the fog of enormous economic uncertainty.”

Paul Johnson, Director at the highly respected Institute for Fiscal Studies, said the amount borrowed during the pandemic was “the most ever outside of the first and second world wars” but admitted more might still be needed in the coming years.

He told the BBC’s Andrew Marr Show the UK’s position would eventually become “unsustainable” and that taxes would need to be raised but that this would likely not happen in the short-term.

“We’re probably looking into the middle years of the 2020s but we need a clear route to doing that,” explained Mr Johnson.

“We don’t know at what point this becomes unsustainable but as and when it does, and if it does, the consequences really can become dreadful. The big judgement, and it’s a terribly tough one, is when to start taking that action.”

Asked if the public should accept tax increases, the think-tank chief replied: “I think that’s right.

“I don’t think it’s right to scare people with the idea that this is going to happen immediately and it’s absolutely right the Government is clear it will do what it needs to do in the short run to support jobs and the economy. Getting the message right is really important.”

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Frances O’Grady, General Secretary of the TUC, branded any Government plan to freeze public-sector workers’ pay as “morally obscene”.

“There’s still time for the Government to step back and I would encourage them to think again, this is not smart politics; it’s morally obscene and it’s bad economics too,” she declared.

Ms O’Grady refused to rule out the possibility of strike action by public-sector workers, saying: “I’m really conscious of the feeling out there that governments only seem to recognise the true value of labour when it’s withdrawn but, of course, there is time to sort this out.

“Nobody can rule anything out at the moment but what I am saying and asking for is that the Government stands by key workers, respects the contribution they are continuing to make, recognises that this is absolutely the wrong time to be talking about pay cuts, and instead we need to start talking about fairness.”