Rishi Sunak: Tax rises at Autumn budget would crush confidence
Former Prime Minister Rishi Sunak has warned Chancellor Rachel Reeves that she must cut spending at the next budget or risk economic disaster.
Writing in his inaugural column for the Sunday Times, Sunak said that Reeves faces a “simple choice: spending cuts or tax rises.”
“If the chancellor opts for the latter, it will crush confidence still further and depress growth, making next year’s budget even more painful than this one will be,” the former leader and Chancellor said, adding that borrowing more wouldn’t be a “credible option”.
Reeves faces increasing pressure to regain control of the public finances, with interest on the UK’s long-term borrowing rising as market worries about the sustainability of the UK’s finances grow.
Sunak said that concerns have been “heightened by this parliament’s unwillingness to back any serious attempts to curb spending”.
In a paper published by the think tank Policy Exchange, the Chancellor has been similarly warned to prevent a “twin-pronged fiscal crisis” by reducing the deficit without raising taxes, any hikes to which could further damage growth prospects in the coming years.
Fears of a tax raid grow
If Reeves chooses to raise taxes instead of cutting spending – on VAT, for example, or landlords’ incomes – she risks “disaster” for the UK, Sunak said.
“[It would] depress UK growth still further… leeway must come from spending cuts.”
Sunak added that the impact of tax rises would be particularly bad if they’re focused on a narrow group “as Reeves tries to remain technically compliant with manifesto commitments… such tax rises would be particularly distortionary and damaging to growth,” he said.
High Earners Not Rich Yet individuals, also known as Henrys, are already bracing for a horrid Budget, with a rumored pension pot tax raid, changes to property tax and a freeze on income “tax threshold all on the table.
“Extra headroom created in this way would not unleash [a] virtuous circle, as the bond markets would, correctly, calculate that this would [hurt] UK growth and that tax rises may well not deliver the expected revenues, so worsening the sustainability of the public finances,” Sunak said.