Tax rises
Chancellor Rishi Sunak has acknowledged that hitting the targets in his new Budget will be a challenge but has reassured MPs that taxes will be lowered before the next election. He also advised that raising taxes was the ‘last thing’ he ever wanted to do as Chancellor, but measures were essential to plan for the post-pandemic recovery.
Sunak has admitted that the tax rises are high and will place a burden on households. However, he defended his measures by saying ‘the purpose of raising taxes is to fix the damage that coronavirus has done. Yes, people are paying more. No one is pretending otherwise. That is why in an ideal world I would prefer not to put taxes up on people. But you do get something for that money. It’s all very well to just look at the taxes without looking at what you’re getting.’
The Chancellor also rejected claims that he had risen taxes to reduce them before the next election to gain votes.
Are the Chancellor’s targets achievable?
The Office of Budget Responsibility (OBR) has suggested that the Chancellor may struggle to hit his targets and have put the likelihood of the government achieving its goals at 55-60%. The odds aren’t terrible, but it seems that there is a relatively high chance that the targets may not be met. The Chancellor admitted that the government lacks a ‘Plan B’ for if interest rates or inflation rose but reassured the House that there are ‘levers they could deploy’ if the situation required.
The impact of fraud
The Chancellor also defended the fact that a possible £27bn has been lost due to fraudulently claimed COVID-19 support schemes: ‘that is what it is, and I said it at the time when you’re in a crisis you’re going to end up casting the net wider than you would in peacetime’. He doubled down on this and called the comments on the cost of financial fraud ‘slightly unfair’ given that we were in a time of ‘national crisis.’
Better days ahead?
On a positive note, Sunak claimed that we ‘are forecast this year to grow at, well, historically very high rates as we recover from the pandemic.’ Despite the tax rises and uncertainty surrounding the time we are living in, hopefully there are things to be optimistic about. The economy has been forecast to return to pre-pandemic levels by 2022 and an overall return to normality looks closer than ever.
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