UK Markets closed
  • FTSE 100

    +36.03 (+0.52%)
  • FTSE 250

    +50.14 (+0.22%)
  • AIM

    +6.12 (+0.49%)

    +0.0029 (+0.25%)

    +0.0056 (+0.4069%)

    -5,698.56 (-12.60%)
  • CMC Crypto 200

    +7.26 (+0.52%)
  • S&P 500

    +15.05 (+0.36%)
  • DOW

    +164.68 (+0.48%)

    -0.39 (-0.61%)

    +10.50 (+0.59%)
  • NIKKEI 225

    +40.68 (+0.14%)

    +176.57 (+0.61%)
  • DAX

    +204.42 (+1.34%)
  • CAC 40

    +52.93 (+0.85%)

Rishi Sunak hints at tax rises in Budget next week

Andrew Woodcock
·4-min read
 (Sky News)
(Sky News)

Rishi Sunak has hinted at tax rises in next week’s Budget, saying: “I would like to keep taxes low for people… but I want to deliver our promises to the British people that we will be responsible with their money.”

The chancellor said the 3 March Budget will set out an “honest and fair plan” to start paying down the massive national debt built up in the coronavirus crisis, which has topped £2 trillion for the first time in history.

And he made clear that the belt-tightening to pay for the pandemic will stretch years into the future, telling Sky News’ Sophy Ridge on Sunday: “This is going to take time to fix.”

Labour’s shadow chancellor Anneliese Dodds accused Mr Sunak of “playing party politics” with the public finances, after reports that he had told Tory MPs he wanted to get tax hikes out of the way now in order to be able to cut them closer to the election expected in 2024.

Ms Dodds said the chancellor should be “focusing on securing the recovery” by making clear that he will extend support measures such as business rate relief, VAT breaks for hospitality businesses and furlough payments.

The shadow chancellor said she was not ruling out tax rises in the longer term but told BBC1’s Andrew Marr Show: “It certainly shouldn’t be right now in terms of immediate tax rises.”

She said the chancellor’s approach was “way out of the international mainstream” at a point when US president Joe Biden was announcing a $1.9trn stimulus package.

Mr Sunak indicated that he will extend coronavirus support until the end of Boris Johnson’s roadmap out of lockdown on 21 June, saying: “We are going to keep supporting people as we reopen the economy.”

But he gave a clear signal that schemes will be wound down swiftly once restrictions are lifted, saying the package will be “aligned” with Mr Johnson’s timetable.

Mr Sunak refused to comment on reports that the Budget will include a three-year freeze on income tax thresholds as a “stealthy” way of raising £6bn by forcing more people into higher bands as their earnings rise.

And he declined to discuss expectations that he will increase corporation tax from 19 to 23 or 25 per cent over the coming years.

But he said: “What I want to deliver is support for our economy, now when it needs it, support along that roadmap helping to drive our recovery.

“But also levelling with people and being straight about the challenges we face over time because of the shock coronavirus has caused our public finances and making sure that we’re clear with people about an honest and fair plan to address that. And I think those things are both compatible.”

Mr Sunak said that he “did not recognise” reports that he is looking for £43bn a year in savings to rebalance the public finances.

But he did not commit himself to sticking with the pledges in the 2019 Conservative manifesto not to increase rates of income tax, national insurance or VAT.

“I would like to be able to keep taxes low for people in general,” he said. “I’m a Conservative and I believe in that.

“But I want to deliver our promises we made to the British people that we will be responsible with their money, that we will look after the nation’s finances.”

His comments came as a Savanta ComRes poll for The Independent showed high levels of support for hikes in corporation tax and the introduction of wealth taxes on assets to pay for coronavirus spending which has totalled around £280bn over the past year.

Mr Sunak said that the cost of servicing the UK’s debt was currently affordable because of historically low interest rates, but voiced concern on the impact when they rise.

With debt around 100 per cent of GDP, a single percentage point hike across rates equates to around £25bn a year in additional interest.

“Interest rates have been at very low levels, which does allow us to afford slightly higher debt levels, but that can always change,” said the chancellor.

Ms Dodds said the focus on tax rises - including council tax rises of up to 5 per cent due to hit households this year - was the wrong priority at this point in the recovery from coronavirus.

“We're an outlier both in having had the worst economic crisis of any major economy but now also having a government that seems to be focused on increasing taxes right now on families when other countries are focused on securing the recovery,” she told Marr.

The shadow chancellor said Labour would look “favourably” on changes to the corporation tax regime in the longer term.

But she said that left-wingers, like former party chairman Ian Lavery, who have attacked Sir Keir Starmer for opposing an immediate hike in levies on business had “got this one wrong”.

“When we talk to businesses right across the country, as I have, what they are really concerned about is confidence,” said Ms Dodds.

“They don't want to see a chancellor who's focused on politics, who's focused on getting any changes through right now, so he can wash his hands of them before the next general election.”

Read More

What is the Budget and why does it matter?

Rishi Sunak risks clash with MPs by using Budget to pave way to tax hikes

Public backs new taxes on wealthy and business to pay for Covid debt

What can we expect from Rishi Sunak’s Budget?