The Treasury is likely to borrow a staggering £370 billion this year in the fight against the deadly coronavirus pandemic. This is more than double the £158 billion deficit in the peak year of the financial crisis.
This will mark the first time debt has been close to 100 percent of GDP for the first time since the 1960s.
Mr Sunak said while interest rates were “exceptionally low” the debt was affordable but wanted it could change.
He said: “But that could change.
“I think no one has a perfect crystal ball about which way interest rates and inflation will move.
Rishi Sunak warns of ‘unaffordable’ debt
Thousands of businesses closed during lockdown
“And obviously, we’re much more sensitive to changes in those rates.
“And if they moved against us, that’s problematic.
“So we have to keep an eye on that.
“And you know that our economy has taken a medium term hit from all of this and that’s what throws our day-to-day borrowing out of whack.”
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His comments come as a warning to Boris Johnson who has backed plans for high spending and opposed tax rises.
The Prime Minister said the Conservatives will maintain their manifesto pledge to not raise income tax, VAT or national insurance.
Plans to cut pensions tax relief for high earners, increase capital gains tax and introduce a digital sales tax for online retailers have been drawn up by the Treasury.
When asked whether pension tax relief is fair, Mr Sunak told Times Radio: “I think I would always say judge by actions, and people will see how we, as a government, and I have acted through this crisis.
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“We’ve always looked to provide support to the British people, be cognisant of those who are most vulnerable in our society and also do the things to support business and free enterprise, because we understand how important that is to our future prosperity.
“Those are all the kind of principles that are important to me, and they will flow through whatever we do.”
As the country came out of its second lockdown yesterday, Mr Sunak has urged the public to “shop for Britain”.
He continued: “Christmas is the time for it.
Businesses forced to close for good
“We’re obviously made some changes, to allow stores to open for longer to help just space things out.
“But the important thing is these stores have worked really hard, everyone will see it up and down their high streets.
“They’re seeing the efforts that companies have gone to to make sure their premises are safe.”
Mr Sunak’s latest warning comes just months after the Chancellor warned “hard times are here” as the UK economy crumbled into the worst ever recession.
Rishi Sunak warns of worst ever recession
In August, Mr Sunak said: “I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here.
“Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.
“But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”
This marked the first time in 11 years the UK has entered into a recession.