Taxing times are ahead for Rishi
RISHI SUNAK will give the Treasury spending pumps a final pull next week. In his Budget on Wednesday, the Chancellor is set to pour out billions more in Covid emergency cash. But he will also announce that the barrels are running dry and a hefty bill is being totted up. Treasury insiders describe the keynote address – being finalised over the next few days – as a “Budget of two halves”.With Boris Johnson’s slow march out of lockdown set to stretch to midsummer, Mr Sunak will spend much of his speech extending furlough, emergency business loans and other measures into June. “The Budget will continue with putting support in place to protect jobs and livelihoods,” said one Whitehall source. Mr Sunak’s second half will focus on the looming tax bills to pay for the unprecedented economic measures that have already reached close to £300billion. “Rishi wants to be honest about what we have spent and what that means in the medium term,” the source added. “He is determined to get the public finances back on a sustainable and stable footing.” Ministers do not expect an immediate tax raid this year. “There is no point raising taxes when we are still in the middle of the crisis,” one Cabinet minister told me. “This is not like the banking crisis.There is plenty of pent up demand with some households building their savings during lockdowns so the economy should bounce back quickly. “The crucial thing now is to get businesses reopening, consumers spending and growth going again.”
YETWHILE avoiding immediate tax hikes, the Chancellor is expected to set out more detail of the growth in the tax burden over the next three years A staggered rise in Corporation Tax from 19 to 23 per cent over the period has already been signalled. Similar phased-in increases in other areas are expected. MPs on both sides currently urging him to rule out any tax increases for the foreseeable future may find his speech difficult listening. Senior Tories have been particularly struck by Sir Keir Starmer’s conversion to the low tax cause this week. “Now is not the time for tax rises for families and for businesses,” the Labour leader told Mr Johnson at Prime Minister’s Questions onWednesday. His plea drew mockery from the Prime Minister, who pointed to Labour’s threat to “put up taxes by the biggest amount in the history of this country” in their last disastrous general election manifesto. Allies of the Chancellor will seek to contrast Mr Sunak’s candid approach with the way Labour pedals the myth that ever-higher levels of public spending can be funded by uncontrolled borrowing. “Labour is being dishonest with the British people about the extent of the financial problem,” said one Tory source. “We have to return to fiscal responsibility but Labour just indulge in rhetoric.”
AT EVERY turn during the pandemic, Labour frontbenchers have demanded ever higher levels of spending than the unprecedented sums provided by the Government. Starmer’s spend-spend-spend and forget-about-the-tab posturing suggests his party has failed to move on from the hard-Left fantasy economics of his predecessor Jeremy Corbyn. Yet his call for no tax rises has angered Labour Left-wingers who want an immediate punitive tax raid on big corporations and wealthy individuals. Starmer will be under intense pressure to clarify his stance when he makes the traditional Opposition leader’s reply to the Budget on Wednesday. Mr Sunak also faces pressure, with many Tory MPs jittery about possible tax rises.This year’s Budget will be his chance to prove that honesty about the public finances really is the best policy.