Yahoo Finance Rishi Sunak vows no more austerity as UK taxes rise by most since 90s
UK chancellor Rishi Sunak has pledged not to cut public services to fix government finances, instead signalling that tax rises will be used to pay off Britain's COVID-19 bill.
"I am not going to find the money we need by taking it from public services like schools or the NHS," Sunak said during a press conference on Wednesday evening. He promised "strong investment in public services" for the duration of this parliament.
The comments signal a break from Tory governments of the last decade who favoured a policy of austerity — cutting back on public services — to address budget deficits created by the 2008 financial crisis.
Sunak instead unveiled the biggest increase in taxes in almost three decades on Wednesday as he delivered his government's annual budget.
READ MORE: £65bn more in COVID spending and 'biggest tax cut in history' for business
The chancellor froze income tax, capital gains tax, and lifetime pension contribution allowances, a policy that will raise billions of pound for the government over the coming years as a result of inflation. Experts said the income tax freeze alone would mean over 1m extra people would have to pay the levy and a further 1m would be bumped up to the highest tax bracket.
WATCH: Income tax thresholds frozen
Corporation tax is also set to rise — the first increase since 1974. The tax on company profits will be increased by a 6 percentage points to 25% in 2023. The increase is forecast to raise £17bn ($24bn) a year for the government by 2025.
Torsten Bell, chief executive of think tank the Resolution Foundation, said Sunak's budget was "the largest tax raising Budget since 1993."
The Office for Budget Responsibility said the tax hikes meant the UK economy would have the highest tax burden since the late 1960s by the end of this parliament. Tax as a percentage of GDP is set to return to levels not seen since Labour's Roy Jenkins was in charge of the Treasury.
READ MORE: What the budget means for your taxes, housing, pensions and more
"I know the British people don’t like tax rises," Sunak said during a press conference in Downing Street. "Nor do I. But I also know they dislike dishonesty even more. That’s why I’ve been honest with you about the problem we have and our plan to fix it."
WATCH: UK budget round-up: The key points
Spending to tackle the COVID-19 crisis has put the government on track to run a budget deficit of more than £350bn this year. UK public debt has soared past £2tn to reach more than 100% of GDP.
Sunak said COVID-19 had "dealt us pretty bad damage to the public finances and the economy" and he had a "responsibility" to fix it. He said the tax increases outlined in his budget were "fair" and part of plans to build "a fairer and more just" Britain post-COVID.
The chancellor pledged not to increase income tax, national insurance, or VAT. However, he refused to rule out future increases in capital gains tax. A report commissioned by Sunak last year recommended increasing the tax on investment gains to bring it in line with income tax.
The tax rises included in Wednesday's budget do not begin to kick in until 2022. The chancellor announced "the biggest tax cut in history" for businesses in the short-term and stimulus measures worth £65bn, meant to kickstart an economic recovery before tax increases start to take effect.
