Rishi: I can’t rule out tax increases

We will have to make some tough choices, he warns MPs

RISHI Sunak laid the ground for tax hikes last night as he warned that ‘tough choices’ lie ahead.

The Chancellor faces a £372 billion black hole this year as the cost of dealing with coronavirus spirals.

in a blunt message, Mr Sunak told the country to brace for possible tax rises or spending cuts as it emerges from the crisis. And he warned there will be no economic recovery if the public does not have the confidence to go out and spend money this summer.

Appearing before the Treasury select committee, Mr Sunak refused to be drawn on whether the Government will be able to honour its commitments in the Tory manifesto not to put up income tax, national insurance or VAT. The Chancellor has already commissioned a review into capital gains tax, sparking fears that a tax grab is on the way.

Mr Sunak said there would need to be a ‘sensible conversation’ on taxation, adding that he wants to restore the public finances to a ‘sustainable footing’ over the ‘medium term’ following the Covid crisis.

He told MPs: ‘ Fundamentally we don’t tax our way to prosperity, we want people to keep more of their own money, we think that is good for growth. But we also have a lot of demands on public services and they need to be funded. We, as a country, need to look at these things in the round.

‘We want public services, we have expectations on the Government to provide certain things, and then we need to look at how we are going to fund those things. i hope we can have a sensible conversation about all of these things as we confront some of the tough choices that are coming over the next few months.’

Borrowing could hit £1.2 trillion over the next five years as the cost of the pandemic grows, the official budget watchdog has warned.

The Office for Budget responsibility laid bare the damage the health crisis is doing to the economy and the public finances.

its ‘central’ projection was for the Government to borrow £372 bn this year and £899 bn over the next five years – pushing the national debt above £2.6 trillion in 2024-25.

But its ‘ downside scenario’ – where the economy fares worse than feared – includes borrowing of £441 bn this year and £1.2 trillion over the next five years. That would push the national debt to well over £2.9 trillion in 2024-25. At the committee hearing yesterday, Mr Sunak said the economic recovery will falter if the public did not have the confidence to return to restaurants, pubs and shops. He added: ‘We all need to do our bit and hopefully that will happen over the coming weeks or months.’

Asked if he would stick to the manifesto promise not to increase income tax, national insurance or VAT, he said it remained the Government’s ‘ambition’, but decisions would have to wait for a Budget.

‘A lot of demands on public services’