Higher taxes WILL come to pay for coronavirus, IFS finance chief warns
HIGHER taxes will come from 2022 to pay for the coronavirus crisis, top finance chiefs warned today.
Paul Johnson, Director of the Institute for Fiscal Studies think tank, predicted that tax rises would come “eventually” to pay back all the billions the Chancellor has borrowed to help Britain through the pandemic.
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Chancellor of the Exchequer Rishi Sunak visits the Worcester Bosch factory in Worcester[/caption]
At a post-budget briefing this morning he said that the focus for now would be on the economic recovery, rather than working out the finances.
But the chancellor admitted earlier that he did want to balance the books in the medium term.
Mr Johnson said earlier: “The time to pay for all this will come, but not this year and not next.
“The capacity will depend on how the economy recovers.
“Let’s hold in the back of our minds…
“A reckoning in the form of higher taxes will come, eventually.”
Boris Johnson earlier this week vowed to stick to his election promise not to raise VAT, income tax or National Insurance to pay for the coronavirus pandemic.
Mr Johnson told the Yorkshire Post during a visit to a construction site in Goole yesterday: “I don’t normally talk about fiscal stuff because I leave that to Rishi (Sunak) the Chancellor but what is in the manifesto is in the manifesto.
“We were elected, we got a big majority from the British people to deliver on that manifesto and we are very, very sincere in wanting to do that.”
He instead may have to look elsewhere for other taxes to hike up to get the public debt under control again.
The Government has shelled out £190billion in spending over the course of the crisis.
And including all the extra revenue in business rates holidays and other measures to help firms stay afloat, the total cost is in the region of £350billion.
Schemes such as the furlough scheme has been costing the Government as much as £14billion a month.
Tax rises could be equivalent to 1.5 per cent of GDP – £35bn a year in extra revenue – the IFS predicted earlier.
Carl Emmerson said the figure is contingent on recovery but “it could be quite a chunky tax rise”.
If the economy bounces back quicker than predicted, more tax revenues would likely help to plug the gap.
But if more people lose their jobs and a recession drags on, this would be much harder.
At the moment the cost of borrowing is very low as interest rates are at record levels.
In future as they rise, the cost of servicing Britain’s huge debts may become less manageable.
Yesterday the Chancellor outlined his mini budget to help Britain get back on course after the coronavirus crisis.
- A stamp duty holiday for homes up to £500,000 to get the housing market moving
- Restaurant and pub bills will be slashed in half when you eat out help the economy bounce back from the coronavirus lockdown
- Employers who unfurlough workers and keep them on until January will get a £1000 bonus
- Vouchers worth up to £5000 each for home-owners to spend on making their places more energy efficient
- A ‘kickstart’ jobs placement programme where the Government will fund 25 hours a week to an employer to take on a young person for at least six months
- A huge boost in apprenticeships with £2000 for firms who create them – and £1000 in extra cash for firms who take on trainees
Yesterday the Chancellor revealed a huge £30billion package of new measures to boost the economy[/caption]
The Chancellor wants to balance the books in the longer term[/caption]
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