UK tells Rishi Sunak now is not the time to raise taxes
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London — Investors, economists and legislators in Britain’s ruling Conservative Party are sending Rishi Sunak a simple message: now is not the time for major tax rises.
In August, the chancellor warned he will need to take “difficult decisions” to return the country to a sustainable fiscal footing after the coronavirus — but signs are he won’t need to take them in his budget this autumn. With the pandemic dragging on, his priority will be to avoid choking any recovery from the country’s deepest recession in at least a century.
“This is not a time, even for someone like me, for raw ideology: at the moment, what we need to do is bear with having much higher debt,” said Steve Baker, a Conservative member of the house of commons treasury committee normally hawkish on the deficit. “I am extremely sceptical that there is any headroom in terms of increasing taxes.”
With the UK’s national debt at more than £2-trillion for the first time in history, the Office for Budget Responsibility has calculated that the government will need to implement £60bn of tax rises or spending cuts every decade to return the national debt to what it calls a sustainable level over the next half a century.
But Sunak’s options are constrained by his party’s promise at the last election not to raise income tax, VAT and national insurance — the treasury’s three main sources of revenue. On top of that, Johnson has ruled out any return to the austerity policies of his predecessors.
Sunak still has room, though, to raise significant sums by targeting companies, duties and tax breaks that he can argue benefit mainly the better-off. Recent media speculation has centred on:
Lifting corporate tax from 19% to 24%, according to the Sunday Times. That could raise £17bn for the government by 2024, according to HM revenue and customs.
Ending the freeze on fuel duty, according to the Sun. That would save the government about £4bn a year — but increase costs for millions of motorists.
Overhauling capital gains tax, seen by many as ripe for reform because money from the sale of assets is taxed more lightly than earned income. The treasury ordered a review of the system in July.
Limiting tax relief on pension contributions. This cost the treasury more than £21bn in the last fiscal year. Restricting the relief available to higher earners could raise more ...
In August, the chancellor warned he will need to take “difficult decisions” to return the country to a sustainable fiscal footing after the coronavirus — but signs are he won’t need to take them in his budget this autumn. With the pandemic dragging on, his priority will be to avoid choking any recovery from the country’s deepest recession in at least a century.
“This is not a time, even for someone like me, for raw ideology: at the moment, what we need to do is bear with having much higher debt,” said Steve Baker, a Conservative member of the house of commons treasury committee normally hawkish on the deficit. “I am extremely sceptical that there is any headroom in terms of increasing taxes.”
With the UK’s national debt at more than £2-trillion for the first time in history, the Office for Budget Responsibility has calculated that the government will need to implement £60bn of tax rises or spending cuts every decade to return the national debt to what it calls a sustainable level over the next half a century.
But Sunak’s options are constrained by his party’s promise at the last election not to raise income tax, VAT and national insurance — the treasury’s three main sources of revenue. On top of that, Johnson has ruled out any return to the austerity policies of his predecessors.
Sunak still has room, though, to raise significant sums by targeting companies, duties and tax breaks that he can argue benefit mainly the better-off. Recent media speculation has centred on:
Lifting corporate tax from 19% to 24%, according to the Sunday Times. That could raise £17bn for the government by 2024, according to HM revenue and customs.
Ending the freeze on fuel duty, according to the Sun. That would save the government about £4bn a year — but increase costs for millions of motorists.
Overhauling capital gains tax, seen by many as ripe for reform because money from the sale of assets is taxed more lightly than earned income. The treasury ordered a review of the system in July.
Limiting tax relief on pension contributions. This cost the treasury more than £21bn in the last fiscal year. Restricting the relief available to higher earners could raise more ...