Yahoo Finance UK faces decades of tax rises after coronavirus crisis
Britain faces decades of tax rises to repair its battered public finances in the wake of the coronavirus crisis, economists have warned.
The Institute for Fiscal Studies (IFS) said managing the elevated debt from the pandemic would be a task “for not just the current Chancellor, but also many of his successors”.
Commenting on the Chancellor Rishi Sunak's statement yesterday, IFS director Paul Johnson said that a “reckoning, in the form of higher taxes” would have to come eventually.
At the same time deputy director Carl Emmerson warned that the economy will shrink.
“If that’s the case, and it’s very likely to be the case, revenues will still be depressed, and if we want to try then to bring the deficit back to where it would have been absent the crisis, we will need to do some spending cuts, or given a decade of austerity, perhaps more likely some tax rises,” he said.
“It’s going to take decades before we manage that debt down to the levels we were used to pre this crisis.”
The think tank also questioned the impact of two of Sunak’s most eye-catching announcements - the “eat out to help out” meal discount scheme and the VAT cut.
The IFS said that the temporary stamp duty holiday announced by Sunak could push up house prices, while it questioned whether the VAT cut were driven by a problem with demand, or supply - with businesses unable to accommodate customers due to social distancing constraints.
Meanwhile HM Revenue and Customs chief executive Jim Harra raised concerns about the value for money of the Job Retention Bonus scheme which gives £1,000 to firms for each furloughed employee they bring back to work.
In a letter to the Chancellor, he requested a ministerial direction - a formal order to go ahead with a scheme despite the concerns.
Harra said that while there was a “sound policy rationale” for the scheme, “the advice that we have both received highlights uncertainty around the value for money of this proposal”.
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