Hammond’s £19b bill to ‘end austerity’
The government will have to find an extra £19 billion a year if it is to uphold Theresa May’s promise that ‘austerity is over’, a major report has said.
In its pre-budget report, the Institute for Fiscal Studies said it means higher borrowing and higher taxes, BBC reported.
If not, pledges to raise NHS spending by £20.5 billion and ‘balance the books’ by 2020, matching spending and taxation, were likely to be incompatible.
The Treasury said its approach was to keep taxes as low as possible.
A Treasury spokesperson said: “Our balanced approach is getting debt falling and supporting our vital public services, while keeping taxes as low as possible. This year, we have already committed an extra £20.5 billion a year to the NHS, scrapped the public sector pay cap, and frozen fuel duty for the ninth year in a row.”
‘Incompatible offers’
“The government seems to have made two incompatible offers to the electorate,” Paul Johnson, the director of the IFS said.
“The first is that it wants to get rid of the deficit in the next few years. And the second thing that the PM said just a couple of weeks ago is that the end of austerity is nigh.
“Well, getting rid of austerity will mean spending at least an extra £20 billion or so by the end of this parliament [in 2023]. If you’re going to spend an extra £20 billion or so, you’re not going to get rid of the deficit unless you have some big tax rises.”
Johnson doubted there would be any significant tax rises in the Budget in two weeks’ time, as there was still a good deal of economic uncertainty over Brexit and the government would struggle to push any substantial changes through Parliament, where it lacks a majority.
“The chances of anything significant — the chances of the sort of £10 billion to £20 billion that might really make a difference — I think are close to zero and essentially for political and not for economic reasons,” he said.
‘Relief boost’?
In his interview with the BBC last week, UK Chancellor of the Exchequer Philip Hammond left the door open to tax rises, but said that any increases would be kept to ‘an absolute minimum’.
One policy the government is looking at is freezing tax thresholds (the amount of money working people can earn before they start paying tax), putting in jeopardy a manifesto pledge to raise the limit to £12,500 a year for lower-rate taxpayers and £50,000 a year for higher-rate taxpayers by 2020.
As the BBC revealed last week, the chancellor is also looking at tightening up self-employment rules, so that more selfemployed people pay higher levels of tax.