Hold off on tax rises for two years, Sunak urged

eCOnOMISTS yesterday warned Rishi Sunak to delay any tax rises for at least two years to avoid choking off the recovery.

The Chancellor is said to be considering a huge tax raid in the autumn Budget to plug the hole in public finances.

Many proposals would hit the middle classes and better-off. Fuel duty, capital gains tax, corporation tax, the pension triple lock and pension tax relief are all reported to be in the firing line as Mr Sunak attempts to shore up Britain’s balance sheet after record spending during the pandemic.

The proposals prompted a backlash from senior Tories at the weekend, with one Cabinet minister telling the Mail the plans could ‘throttle’ hopes of a recovery.

Paul Johnson, of the Institute for Fiscal Studies, yesterday said Tory MPs were right to be concerned. he conceded the Chancellor would have to introduce some ‘pretty hefty’ tax rises ‘at some point’.

But he urged Mr Sunak to delay, telling Radio 4’s Today programme: ‘I think we should be looking probably initially at a couple of years where the Government is supporting the economy, and only really when the recovery is fairly clearly under way and the economy is getting back closer to normal will we be looking at tax rises.’

he questioned whether Mr Sunak would be able to tackle a deficit expected to top £300billion a year without breaking the Tory’s ‘triple lock’ pledge not to raise the rates of income tax, VAT or national insurance.

he said that, following years of cuts to pension tax relief, ‘the problem for the Government is that further reductions... begin to hit people on good earnings but not right at the top, people on £50,000, £60,000, £70,000 a year maybe – core Conservative voters’. he added: ‘If you want really serious amounts of money then you’re looking at doing things which are going to make the geese hiss – increasing VAT, national insurance, income tax rates. If you want really big amounts of money, those are the places you need to look.’

Gerard Lyons, a former economic adviser to Boris Johnson, also urged the Chancellor to delay increasing taxes. he said: ‘We need to embed the economic recovery and that will take at least one or two years.’

Former work and pensions secretary Stephen Crabb yesterday advised Mr Sunak to extend the furlough scheme for the worst-hit sectors beyond the end of next month, while ex-Brexit Secretary David Davis said: ‘The economy is in such a fragile state that pushing tax rates up is very unwise.’

‘Things which are going to make the geese hiss’