Sunak urged to raise taxes in March 11 Budget

CHANCELLOR Rishi Sunak will have to use his first Budget on March 11 to put up taxes if he is to maintain the government’s rules on borrowing, a leading economic think-tank has warned.

The Institute for Fiscal Studies (IFS) said loosening or abandoning the rules, set out in last year’s Conservative election manifesto, would undermine the credibility of any fiscal targets the government set.

During the election campaign, then-chancellor Sajid Javid committed to run a balanced budget for current spending within three years.

But following his dramatic resignation in the Cabinet reshuffle, Mr Sunak is reported to be under pressure from Boris Johnson and his chief adviser, Dominic Cummings, to loosen the spending constraints.

However, the IFS said that even on current policy, borrowing next year could be £63bn, £23bn more than the most recent official forecast, putting the manifesto target in doubt.

With the government committed to increasing investment spending, it said that even getting the current budget into balance would not be enough to bring down underlying debt over the course of the parliament.

Loosening or abandoning the current fiscal rule now would put debt on a clearly rising path.

The Conservative election manifesto also committed the government not to put up income tax, national insurance or VAT.

However, among the alternative ways of raising revenue, the IFS said abolishing entrepreneurs’ relief in capital gains tax and increasing council tax for those living in more expensive properties could form part of a “desirable package” of reforms.