The chancellor will announce a new government Budget in March as part of plans to hike income tax, the Treasury’s permanent secretary has announced.
Speaking at a Public Accounts Committee meeting on the government’s furlough scheme this morning, Tom Scholar said: “There will be a Budget in March. We know a lot will change between now and March we’ll know a lot more about the pandemic.”
Scholar added: “We have to have a Budget before the end of the financial year otherwise the government can’t continue to raise income tax”.
The UK’s Budget deficit is expected to balloon to £400bn this year, amid forecasts that the pandemic will push the country into a double-dip recession. Around 30m people pay income tax each year in the UK, which raises close to £200bn annually.
The government’s tax advisory body yesterday urged the chancellor to roll out a tax raid on buy-to-let properties and other forms of wealth in a bid to shore up more than £14bn to help repair the UK economy.
However, the permanent secretary’s comments today are the first clear signal that significant income tax hikes lie on the horizon.
Scholar added there will be a “new economic forecast” by the spring, “and at that point, the chancellor will be setting out the economic strategy that will support the economy as it as it moves out of the pandemic”.
It comes after the government in September cancelled the usual autumn Budget, and instead announced a Winter Economy Package to help the UK economy weather the second wave of coronavirus.
The financial package included the now-defunct job support scheme, which was scrapped last week in favour of an extension to the furlough scheme.
Chancellor Rishi Sunak this morning dangled the possibility of reintroducing government support programmes such as the Eat Out To Help Out Scheme in the spring.
Sunak told Sky News: “I think it’s right that when we finally exit this and hopefully next year with testing and maybe with the vaccines as well we’ll be able to start looking forward to getting back to normal.
“I think we’ll have to look at the economic situation and then and see what’s the best form of our support, and we want to make sure that we get the economy going strongly coming out of this.”
The government’s Budget delivery has seen several hiccups in the last year, as the pandemic continues to throw the UK economy into turmoil.
Sunak delivered his first Budget as chancellor in March, less than two weeks before Prime Minister Boris Johnson announced the first national lockdown.
That Budget was originally meant to be delivered in November 2019, but was delayed due to the December General Election.
Sunak unveiled a mini-Budget in the Commons in July, in which he laid out plans to revive the UK economy over the summer months from its worst recession on record.
Scholar told the Public Accounts Committee he could not confirm a specific date for the spring Budget, but that there “will certainly be one… there has to be one before the end of the financial year”.