Britain ‘faces decades of tax rises’ to repair public finances after coronavirus crisis
BRITAIN could face 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”.
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Economists say managing the debt will be a task ‘for not just the current Chancellor (Rishi Sunak), but also many of his successors’[/caption]
IFS director Paul Johnson said that a “reckoning, in the form of higher taxes” would have to come eventually.
Laying bare the scale of the crisis, he said government borrowing will be more as a share of GDP than it has ever been in the last 300 years outside of the two World Wars.
And deputy IFS director Carl Emmerson warned that the economy would probably not be as big as it would have been had the crisis not hit.
He said tax rises or spending cuts worth a whopping £35 – £40 billion would be needed to return public finances to a stable level following the crisis – equivalent to 1.5 per cent of GDP.
HIKES IN TAXES
Only hikes in major taxes such as income tax, VAT and National Insurance contributions would raise anywhere near that level of revenue.
But Boris Johnson has stood by his election manifesto pledge not to raise any of the three – known as his ‘triple lock’ promise.
Chancellor Rishi Sunak refused to rule out other taxes yesterday however.
And former Tory leader Lord Hague said it was inevitable taxes will have to be raised because spending will be “permanently higher”.
He told Times Radio: “The country can’t keep adding to debt forever. You have to make finances sustainable.”
Boris Johnson has stood by his election manifesto pledge not to raise income tax, VAT and National Insurance contributions[/caption]
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Presenting the IFS’ analysis of MR Sunak’s mini budget, Mr Emmerson said: “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.
“It’s going to take decades before we manage that debt down to the levels we were used to pre this crisis.”
Mr Sunak told the Commons in what amounted to a mini-Budget that the Government would do “all we can” to keep people in work after the economy contracted by 25% in just two months.
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