UK could face decades of tax rises to meet the cost of cri­sis

Western Daily Press - - Uk&world News - HAR­RIET LINE AND DAVID HUGHES Press As­so­ci­a­tion

BRI­TAIN could face decades of tax rises to re­pair its bat­tered pub­lic fi­nances in the wake of the coron­avirus cri­sis, econ­o­mists have warned.

The Institute for Fis­cal Stud­ies (IFS) said man­ag­ing the el­e­vated debt from the pan­demic would be a task “for not just the cur­rent Chan­cel­lor, but also many of his suc­ces­sors”.

And the think tank ques­tioned the im­pact of two of Rishi Su­nak’s most eye-catch­ing an­nounce­ments – the “eat out to help out” meal dis­count scheme and the VAT cut.

At a pre­sen­ta­tion of its find­ings on the Chan­cel­lor’s state­ment, IFS direc­tor Paul John­son said that a “reck­on­ing, in the form of higher taxes” would have to come even­tu­ally.

And deputy direc­tor Carl Em­mer­son warned that the econ­omy would prob­a­bly not be as big as it would have been had the cri­sis not hit.

“If that’s the case, and it’s very likely to be the case, rev­enues will still be de­pressed, and if we want to try then to bring the deficit back to where it would have been ab­sent the cri­sis, we will need to do some spend­ing cuts, or given a decade of aus­ter­ity, per­haps more likely some tax rises,” he said.

“It’s go­ing to take decades be­fore we man­age that debt down to the lev­els we were used to pre this cri­sis.”

The IFS said that the tem­po­rary stamp duty hol­i­day an­nounced by Mr Su­nak could push up house prices, and deputy direc­tor He­len Miller ques­tioned whether the meal dis­count scheme and VAT cut were driven by a prob­lem with de­mand, or sup­ply – with busi­nesses un­able to ac­com­mo­date cus­tomers due to so­cial dis­tanc­ing con­straints.

She said many busi­nesses would not pass on the VAT cut to cus­tomers so “the firms that ben­e­fit most would be those who have the high­est sales, who are op­er­at­ing clos­est to nor­mal”.

She also ques­tioned why the “eat out to help out” scheme did not in­clude take­aways.

Mean­while HM Rev­enue and Cus­toms chief ex­ec­u­tive Jim Harra raised con­cerns about the value for money of the Job Re­ten­tion Bonus scheme which gives £1,000 to firms for each fur­loughed em­ployee they bring back to work.

In a let­ter to the Chan­cel­lor, he re­quested a min­is­te­rial di­rec­tion – a for­mal or­der to go ahead with a scheme de­spite the con­cerns. Mr Harra said while there was a “sound pol­icy ra­tio­nale” for the scheme, “the ad­vice that we have both re­ceived high­lights un­cer­tainty around the value for money of this pro­posal”.

Mr Su­nak ear­lier said there would be a “dead weight” cost to the scheme, as some em­ploy­ers who in­tend to re­tain work­ers any­way would ben­e­fit. Labour leader Sir Keir Starmer said the Gov­ern­ment could not af­ford the “dead weight”. He told re­porters “it should have been tar­geted in the ar­eas that most need it.”

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