Rishi Sunak signals that tax hikes will be delayed for some time
Rishi Sunak has signalled he will hold off on tax rises and Budget cuts until the UK’s economic recovery is further along.
Sunak said today that the UK needs to balance its books “over time”, just a day after saying at his conference speech that the Tories had a “sacred responsibility to future generations to leave the public finances strong”.
The Treasury has spent more than £190bn in emergency Covid funding, which is projected to bring the Budget deficit to a record £350bn for the year.
Sunak told Sky News today that he would restore the public finances to a more sustainable level “over time” as the country’s main priority now should be restoring jobs and getting the economy moving again.
Job losses are expected to spike by as much as 500,000 people next month as the furlough scheme ends.
“My overall focus at the moment is trying to protect as many jobs as possible,” Sunak said.
“What is happening in our economy at the moment is significant and severe, many people are losing their jobs. So the focus of my intention in the short term is doing what we can to support as much employment as possible.
“Over time we need to have sustainable public finances. That is important to me, it is important to the Government, but in the short term the best way to have long-term sustainable public finances is to protect as much employment as possible.”
Sunak’s speech yesterday made it clear that he would eventually be forced to introduce tax rises and Budget cuts to get the public finances back under control.
The chancellor said that the government faced “hard choices” over the coming years.
“Through careful management of our economy, this Conservative government will always balance the books,” he said.
“If instead we argue there is no limit on what we can spend, that we can simply borrow our way out of any hole, what is the point in us?”
It comes as a group of right-wing Tory MPs have called for widespread tax cuts in response to the Covid recession.
An open letter from the free market Institute of Economic Affairs think tank called for the top rate of income tax to be capped at 40 per cent and for VAT to be slashed to 17.5 per cent for all industries.
The letter was signed by a group of over 30 economists, business people and politicians, including Tory MPs Steve Baker, Greg Smith, and Andrew Lewer.