RISHI’S MASKED TAX RAID

What the Budget means for YOU

THE devastating financial toll of the pandemic was revealed by Rishi Sunak yesterday, as he set out plans to raise taxes to their highest level since the 1960s – with increases totalling £30billion a year.

In a sober Budget address the Chancellor unveiled an extra £ 65billion in Covidrelated spending to protect jobs and reboot the economy.

He warned that at least five years of tax rises would then be needed.

This will include increases in corporation tax and a freeze in income tax thresholds.

The Office for Budget Responsibility (OBR) last night said the double whammy, coupled with a string of stealth taxes, would push the tax burden up to 35 per cent – the highest level for more than half a century.

Paul Johnson, director of the Institute for Fiscal Studies, warned the increases were likely to remain indefinitely as the Government tries to rein in borrowing which has hit £355billion this year – equal to almost £13,000 for every household in the UK.

Mr Johnson said: ‘ This time expect the tax burden to stay high. We are in a new phase of UK economic history.’ The huge tax rises will be phased in gradually to avoid hitting the economic recovery.

The income tax threshold freeze alone will raise £8billion a year for the Treasury by 2026. However, it will also drag 1.3million low-paid workers into the system – and push a million middle income earners into the punitive 40p rate.

The Chancellor has pledged billions to help the economy through lockdown and kick-start the recovery. One Tory described it as ‘cash now, pain later’.

Trying to remain upbeat following better-than-expected growth figures, Mr Sunak last night declared: ‘Our recovery begins today.’ The Chancellor acknowledged that the levies were painful, but said he had to be ‘honest’ with the public about the scale of the crisis facing the public finances.

He said the Government could not afford to ignore the debt mountain, which he said had left the country at the mercy of international interest rates.

‘I know the British people don’t like tax rises, nor do I,’ he said.

‘But I also know they dislike dishonesty even more, that is why I have been honest with you about the problem we have and our plan to fix it.’ In the run-up to the Budget, Tories had threatened mutiny if the Chancellor raised taxes. But last night the rebellion looked set to fizzle out before it had begun, with most MPs praising the Chancellor’s balancing act.

Former Brexit minister Steve Baker said: ‘Our economy is on very thin ice with very hot water underneath. The Chancellor showed himself to be dancing on ice with great skill and talent.’ In one of the most important Budgets in years:

The stamp duty holiday was extended in full until the end of

June with discounted rates continuing until the end of September;

The OBR predicted that the rapid vaccine rollout would lead to a faster return to growth.

Unemployment was forecast to peak at 2.2 million this summer - 1.8 million lower than originally predicted by the OBR;

The inheritance tax threshold was frozen, in a move that will claw back another £445million a year from grieving families by 2026;

Thresholds were also frozen for pension savings and capital gains tax – with the Chancellor refusing to rule out an increase in the levy on unearned income in future years;

The £ 20- a- week top- up for Universal Credit was extended for six months;

The Chancellor revealed the total cost of Covid support is on course to top £400billion;

Mr Sunak froze fuel duty, but hinted that the decade-long freeze would not continue indefinitely;

The spending limit on contactless payment cards was more than doubled to £100

Figures showed alcohol duty was the only tax take to increase last year, with locked down families paying an extra £800 million;

Teesside, Liverpool and Plymouth were among locations named for the first eight ‘freeports’ where the Chancellor hopes low taxes and light regulation will drive economic activity;

Support for the self-employed was extended to cover 600,000 people previously excluded.

Budget sweeteners include the continuation of the furlough scheme until September and additional help for the hospitality sector, including the extension of the VAT cut and £5billion in grants to help reopen.

Business will benefit from a massive two-year tax break for investment. The ‘super-deduction’ allowance will let some firms offset 130 per cent of the value of investment against tax, at an estimated cost of more than £12billion a year.

Mr Sunak described the move as ‘a tax cut the like of which we have never seen in this country’.

Mr Sunak told MPs that the damage caused to the economy and public finances by the pandemic had been ‘acute’.

He said borrowing had hit £355billion this year, the highest level since the end of the Second World War. And he warned that next year’s was on course to hit £234 billion – equal to more than 10 per cent of national income.

Without a ‘corrective’ he warned that borrowing would continue at unsustainable public services.

And he warned it would be ‘the work of many governments’ to fully fix the UK’s finances.

The Chancellor said that, unlike the years of austerity after the financial crisis, the Government would not cut public spending, relying instead on tax rises to close the gap.

He said the Tories were now ‘the party of public services’. But the OBR last night said the small print of the Budget implied a £4billion cut to Whitehall budgets.

The independent watchdog also suggested further spending increases were inevitable to pay for

‘Our recovery begins today’

Covid-related expenses like vaccinations even after the immediate crisis has passed. Tory MPs broadly welcomed the Budget. Former cabinet minister Jeremy Hunt described the measures as ‘impressive and reassuring’ – but voiced disappointment that the Chancellor had again ducked the issue of social care reform.

Former chancellor Sajid Javid predicted a rapid recovery, but urged Mr Sunak to also look at the scope for spending cuts. ‘The faster our economy can bounce back, the easier it will be to manage our debt in the future,’ he said. ‘Thankfully, I believe that our prospects for a sharp, strong recovery look very promising.’

Mel Stride, chairman of the Commons Treasury committee, said the corporation tax increase was ‘quite a hike’.

But added: ‘On balance it seems to be that this is a reasonable move given that none of the possibilities are particularly palatable.’ Former Cabinet minister David Davis said the Universal Credit increase should have been made permanent and criticised the corporation tax raid, saying it would have a ‘deterrent effect’ on inward investment.

But Mr Sunak said the UK would still have one of the lowest corporation tax rates in the G7, making it an attractive place to invest.

Jeremy Corbyn accused the Chancellor of stealing policies from the last Labour manifesto, which the Conservatives had criticised for proposing a rise on corporation tax to 26 per cent.

‘The Chancellor had obviously read quite a lot of John McDonnell’s proposals before the last election,’ he said.

Current Labour leader Sir Keir Starmer said the Budget was a ‘quick fix, papering over the cracks’.