Reports of possible UK tax rises draw ire of some in ruling party

Times and Telegraph reported over the weekend that the Treasury is examining options to raise taxes to fund stimulus.

The UK's Chancellor of the Exchequer Rishi Sunak will have to strike a balance in the coming months between maintaining aggressive stimulus measures in order to stave off large-scale job losses while the national debt rockets to historic proportions [File: John Sibley/Reuters]
The UK's Chancellor of the Exchequer Rishi Sunak will have to strike a balance in the coming months between maintaining aggressive stimulus measures in order to stave off large-scale job losses while the national debt rockets to historic proportions [File: John Sibley/Reuters]

Lawmakers in Boris Johnson’s Conservative Party criticized the idea of increasing taxes to plug the country’s swelling budget deficit, after weekend reports suggested the Treasury is considering such plans in the autumn.

Chancellor of the Exchequer Rishi Sunak faces a difficult challenge in the coming months, as he comes under increasing pressure to maintain spending to support Britain’s virus-ravaged economy, even with the national debt surpassing 2 trillion pounds ($2.7 trillion) for the first time in history.

Over the weekend, the Telegraph reported that Treasury officials are pushing for significant tax rises to raise at least 20 billion pounds a year, with proposals under consideration including aligning capital gains tax with income tax and raising fuel and other duties. The rate of corporation tax could rise to 24% from 19%, the Times reported.

“Tax rises are the wrong response to the current situation,” said Conservative Member of Parliament Marcus Fysh on Twitter. “We need to help the economy not strangle it.”

Ire from his backbenchers over fiscal policy is the latest headache for Johnson, who has upset the party’s rank-and-file following a series of policy u-turns and a fiasco involving exam grades. MPs return to Westminster on Tuesday after their summer break.

Poll Shock

In another unsettling factor for his party, voters are expressing disapproval of Johnson’s handling of the pandemic and recent signs of government ineptitude. An Opinium poll on Sunday said the Tories had lost a 26-point lead over Labour over the past five months.

John Redwood, another Tory MP and former cabinet minister, also publicly criticized the notion of tax increases.

“You cannot tax your way to faster growth and more prosperity,” Redwood said on Twitter. “We need policies to promote more jobs and activity to get the deficit down.”

Sunak’s deputy, Steve Barclay, the chief secretary to the Treasury, declined to comment on the reports on Sunday, saying the government is trying to drive growth while keeping an appropriate balance among debt, taxation and spending. In a statement, the Treasury said it does not comment on speculation ahead of fiscal events.

“The real objective is reduce the economic scarring from Covid,” Barclay said on Times Radio. “What we’re focused on is how do we get the economy firing up again.”

Business leaders also sounded a note of caution. Adam Marshall, director-general of the British Chambers of Commerce, said the possible tax hikes would be a “damaging mistake.”

“We do not want to make a choice between a strong recovery with lots of investment and risk-taking by businesspeople, or a short-term repair of the public finances,” he said on Times Radio. “We’ve got to give the recovery space to build and grow.”

Source : Bloomberg

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