UK markets closed
  • FTSE 100

    6,915.75
    -26.47 (-0.38%)
     
  • FTSE 250

    22,251.26
    +3.72 (+0.02%)
     
  • AIM

    1,236.50
    -2.54 (-0.21%)
     
  • GBP/EUR

    1.1513
    -0.0009 (-0.08%)
     
  • GBP/USD

    1.3707
    -0.0028 (-0.20%)
     
  • BTC-GBP

    43,612.36
    -923.83 (-2.07%)
     
  • CMC Crypto 200

    1,235.89
    +8.34 (+0.68%)
     
  • S&P 500

    4,128.80
    +31.63 (+0.77%)
     
  • DOW

    33,800.60
    +297.03 (+0.89%)
     
  • CRUDE OIL

    59.34
    -0.26 (-0.44%)
     
  • GOLD FUTURES

    1,744.10
    -14.10 (-0.80%)
     
  • NIKKEI 225

    29,768.06
    +59.08 (+0.20%)
     
  • HANG SENG

    28,698.80
    -309.27 (-1.07%)
     
  • DAX

    15,234.16
    +31.48 (+0.21%)
     
  • CAC 40

    6,169.41
    +3.69 (+0.06%)
     

Conservative triple lock manifesto pledge faces 'significant pressure'

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Lucy Harley-McKeown
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
A pedestrian walks past the headquarters of Her Majesty's Revenue and Customs (HMRC) in central London February 13, 2015. British lawmakers plan to call up the bosses of HSBC and the tax authority, HMRC, to quiz them over allegations some clients of HSBC's Swiss private bank evaded tax.     REUTERS/Stefan Wermuth (BRITAIN - Tags: BUSINESS POLITICS CRIME LAW)
The report also suggests, ahead of the UK's next budget on Wednesday, that now is not the time for tax rises or fiscal consolidation, but significant fiscal measures, including revenue raising, will probably be needed in the future. Reuters/Stefan Wermuth

The government’s tax lock manifesto commitment is due to come under significant pressure in the coming months as officials grapple with the economic consequences of the coronavirus in the UK.

That's according to an unanimously-agreed Treasury Committee report as part of its inquiry into Tax After Coronavirus.

Before the Conservative party was elected in 2019, it pledged to introduce a "triple tax lock" to ensure rates of income tax, national insurance and VAT would not rise if they were elected to government. The coronavirus, and its strain on public finances, has brought that pledge into doubt for many reasons.

The commitment not to increase the rate of income tax does not preclude it from adjusting income tax thresholds, however, the report notes. It says the government could raise revenue simply by freezing income tax thresholds, and that such a change would cause minimum economic distortion.

Increases in national insurance contributions may be especially difficult given the probable impact on jobs, at a time when increasing employment is likely to remain an economic priority.

Corporation tax, which wasn't listed in the triple lock, could be an alternative way to raise cash without stumping growth, the report says. It is currently at 19% and, if balanced with other measures, could be productive.

READ MORE: Britain to launch the world's first sovereign green savings bond

The report also suggests, ahead of the UK's next budget on Wednesday, that now is not the time for tax rises or fiscal consolidation, but significant fiscal measures, including revenue raising, will probably be needed in the future.

"The public finances are on an unsustainable long-term trajectory, primarily due to projections of rising age-related spending based on existing government commitments, which has been exacerbated by the fiscal impact of the coronavirus pandemic," it says, adding that witnesses to the inquiry said that now is "not the time for tax rises or fiscal consolidation, which could undermine the economic recovery."

It notes that public finances are increasingly exposed to rises in interest rates and that significant fiscal measures, including revenue raising, will probably be needed in future.

"This is a large-scale and long-term challenge that requires taking a view of the whole tax system, how it can be reformed, and how it can raise revenue in a way that minimises economic damage as well as effectively supporting public services, which in turn can promote growth," it concludes.

READ MORE: UK rail fares to rise above inflation for first time in nearly a decade

Other recommendations include making the reform of stamp duty land tax a priority and introducing temporary three-year loss carry-back for trading losses as well as increasing investment incentives for business.

Rt Hon. Mel Stride MP, chair of the Treasury Committee, said: “Tax is often an area of significant disagreement between parties, so I am particularly pleased that the cross-party Treasury Committee has unanimously agreed this report.

"With our public finances on an unsustainable long-term trajectory, our clear message is that Budget 2021 is not the time for tax rises or fiscal consolidation, which could undermine the economic recovery. But we will probably need to see significant fiscal measures, including revenue raising, in the future."

Watch: Sunak indicates support will continue but does not rule out tax rises