Tax rise warning: Rishi Sunak told increases needed NOW ahead of budget announcement
The Chancellor will outline his economic recovery plan in the House of Commons on Wednesday afternoon. The coronavirus pandemic and three national lockdowns have sent public sector debt to a record-high of £2.1trillion. Government borrowing has also reached a peace-time high of £270.6billion, according to the Office for National Statistics.
Mr Sunak is widely expected to hike corporation tax to 25 percent and resist increases to income tax, VAT and National Insurance.
Former Tory leader William Hague has reluctantly told the Chancellor now is the time for business and personal taxes to rise.
Lord Hague was succeeded by Mr Sunak in his Richmond, Yorks, seat when he stepped down as an MP in 2015.
He argued the only way to avoid tax increases would be to create smaller state, cut spending and reduce borrowing.
Lord Hague insisted none of these would be possible in the current economic circumstances and branded them “dangerous illusions”.
Writing in the Daily Telegraph, Lord Hague said: “It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up.
“To maintain the opposite viewpoint, you have to believe in one or all of the following three arguments.
“That we need a smaller state, and it is spending that should be cut as soon as possible after the crisis; that higher tax rates generally produce less revenue anyway; or that we can go on borrowing at very low interests for so long that all tax increases can safely be postponed.
“All three of these arguments are now dangerous illusions.”
Lord Hague argued the Treasury cannot carry on spending, despite low interest rates, as the threat of inflation could further increase debt.
He added: “It is dangerous because inflation can easily return, particularly when pent-up demand for goods and services follows release from lockdown.
“And it is particularly dangerous in Britain because so much of our debt is index-linked – about a quarter of it, compared with an average of 3 to 8 percent across major developed nations.”
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Mr Sunak released a video ahead of tomorrow’s announcement and said the Government would not stop supporting people and businesses.
He said: “Throughout this crisis I have always been determined to make sure the Government is doing what it can to provide support to get through this enormously difficult time and that’s not going to stop.
“People should be reassured that we are going to continue to be there to support them as we get through this difficult period and emerge – hopefully stronger – on the other side.”
Speaking on Monday, Boris Johnson said he was confident the Budget would “pave the way for a strong, jobs-led recovery”.
He added: “That’s what our focus is going to be on.”
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