Rishi hints at huge tax hikes to pay for £190bn virus spree
RISHI Sunak yesterday hinted at drastic tax rises in his autumn budget to pay for his colossal spending spree to support the economy.
Under sustained questioning by MPs, the Chancellor repeatedly refused to rule out hikes in income tax, VAT and other levies to reduce the Treasury’s soaring deficit amid the coronavirus crisis.
He intensified the speculation by insisting he wanted to return to “sustainable public finances” in the medium term, adding: “There are tough choices ahead.”
Mr Sunak, who last week announced £30billion of measures in a mini-budget that followed around £160billion earlier in the crisis, was repeatedly pressed on how he would fund the spending during a Commons Treasury Committee hearing yesterday.
Ambition
He stonewalled a series of questions from Tory and Labour backbenchers about whether his autumn budget will raise taxes with the same answer, saying: “I cannot comment on future fiscal policy.”
He added: “We of course look at everything all the time, that’s what we do.
“In terms of what does that mean for spending and taxes, those are decisions that will have to wait until we get to budgets, but there are tough choices ahead, that is clear.
“We have an ambition to deliver upon our priorities and the promises we made. We’ve been through hopefully this oncein-a-lifetime episode – it has had an enormous impact on our economy, on jobs, our public finances – and that means there are tough choices to come.”
Pressed by Tory MP Mel Stride, the committee’s chairman, on whether the Government would stick to Tory general election manifesto pledges not to raise income tax, National Insurance or VAT, the Chancellor said: “Our ambitions are to deliver on all the priorities we have set out but on future tax policies I can’t comment one way or another. Those decisions are made in future budgets.”
When Mr Stride told him Boris Johnson had promised not to break the manifesto pledge, Mr Sunak said: “I always agree with the Prime Minister.
“But I have a reasonably perhaps pedantic and boring approach to this.
“Whenever I am asked about anything to do with taxation, I hope you’ll understand and forgive me that I give exactly the same answer so that no one can read anything into what I’m saying and therefore start speculating about what may or may not be the case.”
Later in the hearing, the Chancellor signalled that he wanted to minimise tax rises if he could.
He said: “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.
“We also have a lot of demands on public services and they need to be funded.
“We, as a Parliament, need to look at these things in the round.”
Treasury figures yesterday showed small businesses have now borrowed nearly £32billion under the Government’s Bounce Back loan scheme. The data also showed that 54,538 Coronavirus Business Interruption Loans to firms have been approved, providing £11.85billion.
More than 400 Large Business Interruption Loans, worth £2.73billion, have also been approved.
The Treasury added that 9.4 million jobs have been furloughed – unchanged from last week – as firms claimed £28.7billion to keep workers in employment under the Government’s Job Retention Scheme.
During the hearing, Mr Sunak insisted a Treasury review of Capital Gains Tax announced this week was “usual practice” and not a step towards hammering the wealthy with tax rises.
News of the review sparked speculation that the Chancellor was considering hiking the levy on asset sales to bring in cash. But asked about the move during the hearing, he said: “What I would say is this is a reasonably business-as-usual practice for the Treasury to ask the Office of Tax Simplification to examine various parts of our tax system to make sure they are up to date.
“It happens every year, so the last year or two the OTS have looked at inheritance tax, before that they looked at VAT, they have looked at stamp duty and then before that income tax and national insurance.
“So I think actually that capital gains tax is the only one they haven’t looked at… over the last few years.”
Mr Sunak also admitted that many of the house moves as a result of the decision to increase the residential stamp duty threshold would have taken place anyway.
He told the committee: “What it is going to do is bring forward transactions that would have happened otherwise – they will now just happen sooner.
“Ordinarily that wouldn’t be a good thing but, right now, that is exactly what we want to have happen – we need the activity now to help drive the recovery.”