Don’t wreck recovery by raising taxes, Rishi!

Top think-tank warns Chancellor to avoid ‘act of self-sabotage’

RISHI Sunak was warned last night that hiking taxes to pay for the Covid crisis would be ‘an act of selfsabotage’ which would derail Britain’s economic recovery.

The Chancellor has repeatedly signalled that tax rises will be needed to repair the battered public finances.

With Britain’s national debt topping £2trillion for the first time and borrowing expected to hit £350billion this year, he has admitted it will be difficult to stick to the Tory manifesto pledge not to increase income tax, national insurance or VAT.

But a report by top think-tank the Centre for Policy Studies has warned increasing taxes will hamper the recovery, as well as making Britain one of the world’s least competitive and highest-paying tax regimes.

Tom Clougherty, the think-tank’s as well as removing allowances head of tax, said: ‘Trying to close the fiscal gap now, in the midst of and reliefs, such as the exemption enormous economic uncertainty, on selling your main home. and with a post-Brexit trade deal Officials have also reportedly hanging in the balance, would be considered increasing corporation an act of self-sabotage.’ tax from 19 to 24 per cent.

He said any ‘short-term revenue The appeal by the Right-wing boost’ would likely be outweighed think-tank, created by Margaret in the medium term by a drag on Thatcher and Sir Keith Joseph, economic growth. He added: ‘Britain will resonate with Tory backbenchers cannot afford to take its tax who are fiercely opposed competitiveness for granted.’ to tax hikes.

The Treasury has already ordered David Davis, former Brexit secretary, a review of capital gains tax – a said: ‘Even in normal circumstances levy on profits generated when you have to be wary selling assets, such as investments of increasing taxes in such a way and second homes. It will look at as to reduce economic activity. whether to increase the levy, currently When the country and the economy between 20 and 28 per cent, is as fragile as it is right now it would be an unforgivable error to stall growth with extra taxes.

‘They would have the opposite effect intended.’

But even those who believe tax hikes are both necessary and inevitable have stressed that now is not the time to do it.

Among them is Britain’s leading economic think-tank the Institute for Fiscal Studies.

Earlier this week it warned the average family faces paying an extra £125 a month within five years to stop the Government debt spiralling out of control.

It predicted tax rises worth £42billion a year would be required by the middle of the decade – the equivalent of an increase of 6p in both basic and higher rate income tax.

Despite this, director Paul Johnson has said the fragile state of the economy would make it ‘entirely inappropriate for the Chancellor to consider raising taxes this year or next, or possibly even the year after’.

Since the Tory Party conference last week, Mr Sunak has hinted tax rises may be delayed to save jobs, amid fears that further restrictions and lockdowns to cope with a second wave of the virus could lead to mass layoffs.

A Treasury spokesman said: ‘The UK has a highly competitive business tax regime and remains one of the best places in the world to do business. We have a lower headline rate of corporation tax than any other major comparable economy and generous reliefs for both research and development.

‘We’re committed to a fair and sustainable tax system that helps people and families with the cost of living, funds the first-class public services they expect and creates an environment for business to succeed.’

‘Fair and sustainable’