Budget 2021: Rishi Sunak hints at tax rises next week
Rishi Sunak has hinted that he will raise taxes in the Budget on Wednesday, saying that he wanted to “level” with people about the fiscal challenges to come.
He also suggested that he would extend Covid support schemes in his Budget, as expected, saying “we went big, we went early and there’s more to come”.
The furlough scheme, VAT cut to retail and hospitality, stamp duty holiday on house purchases of up to £500,000 and business rates holiday are all expected to be extended to June at a cost of £30bn.
When asked about potential tax rises in the Budget, Sunak told Sky News: “I would like to keep taxes low for people… but I want to deliver our promises to the British people that we will be responsible with their money.”
He added: “What I want to deliver is support for our economy, now when it needs it, support along that roadmap helping to drive our recovery.
“But also levelling with people and being straight about the challenges we face over time because of the shock coronavirus has caused our public finances and making sure that we’re clear with people about an honest and fair plan to address that. And I think those things are both compatible.”
When asked about specific tax rises, the chancellor refused to comment on what policy levers he would pull.
Before the Open newsletter: Start your day with the City View podcast and key market data
The chancellor is widely expected to raise corporation tax in the Budget next week, with speculation he will outline a plan to increase it from 19 per cent to 25 per cent.
Each percentage increase would raise £3.3bn extra in tax revenue a year.
Sunak may also look to raise Capital Gains Tax in the Budget in a bid to claw back some of the £300bn in Covid spending.
The Sunday Times reports today that the chancellor will freeze the threshold at which people start to pay income tax at £12,500 for three years and freeze the rate at which people start to pay the 40p rate at £40,000 for three years.
This could bring in an extra £6bn a year without breaking the Tories’ 2019 manifesto pledge to not raise income tax.
Shadow chancellor Anneliese Dodds told the BBC that Labour would not support corporation tax rises in the short term as it would choke off the UK’s economic recovery.
She said: “There does need to be changes, but the big question is why does there need to be changes right now?
“If there’s a long term plan for changing the corporation tax regime we’ll look at it.”
She also accused Sunak of playing politics on his policy decisions.
“To [Tory MPs] he said he wanted to push these tax change through now so that they will be out of the way for the next General Election so he can cut taxes at that point – that’s not being focused on our recovery , that’s being focused on his own party’s prospects at the next General Election,” she said.
Sunak denied he had said this to Tory MPs.