Sunak hints at tax increases
RISHI Sunak yesterday hinted at future tax rises to help pay the colossal bill for coronavirus bailout schemes.
Setting out details of the latest rescue package, the Chancellor said the Treasury had already paid out £190 billion in additional support for business, workers and public services this year.
Mr Sunak confirmed the cancellation of a planned November Budget at which he had expected to start restoring order to Britain’s battered public finances.
He said that, with the virus returning, the Government had to focus on trying to shore up the ‘viable’ parts of the economy. But he warned that spending on the scale seen in the first half of this year was ‘not affordable or sustainable’ in the longer term.
He said the Treasury had to be ‘mindful of the cost of things’ but insisted the economy would have been in even worse shape if the huge package of financial support for jobs had not been put in place earlier this year. Treasury officials believe the new Job Support Scheme announced yesterday could cost as much as £9 billion over the next six months, with official modelling showing up to 5milllion workers could take advantage of it. Cheap loans, VAT cuts and help for the self-employed are likely to cost billions more.
Asked how he was going to pay for the extraordinary spree, Mr Sunak acknowledged that ‘difficult decisions’ on tax and spending would be needed in future. Boris Johnson has ruled out a return to austerity, leaving the Chancellor with little option but to raise taxes in the medium term if he wants to bring Britain’s borrowing under control.
Paul Johnson, of the Institute for Fiscal Studies, said the scale of the coronavirus crisis means Mr Sunak is ‘still very much in blank cheque territory’ as he suggested the UK could end the year with two million fewer jobs than it had at the start.
He predicted ‘pretty hefty tax rises’ – likely by the mid-2020s. No10 has pledged to stand by Tory manifesto promises of no increases in the headline rates of income tax, national insurance and VAT.