Chancellor Rishi Sunak is said to have agreed to maintain the Tories’ so-called triple tax lock at next month’s Budget, preventing him from raising income, national insurance or value added tax.
The chancellor had come under pressure from Treasury officials to shun the commitment made in the Conservative Party’s 2019 manifesto not to increase rates for five years.
But Sunak has agreed with Prime Minister Boris Johnson that he will hold the triple tax lock, the Financial Times reported, citing government insiders.
The move could force the chancellor to increase other taxes, such as corporation tax and potentially capital gains tax, in a bid to pay down the UK’s ballooning deficit.
Some Treasury figures had reportedly hoped that Sunak would abandon the pledge, given he has spent roughly £280bn fighting the impact of the Covid-19 pandemic.
UK borrowing is expected to hit £400bn for the 2020-21 financial year, marking the country’s highest budget deficit outside wartime.
But the government is said to have ruled out reneging on its key manifesto promise.
“To go back on the manifesto pledge would be a betrayal of trust — pandemic or no pandemic,” one aide to the chancellor told the FT. “It was a very significant pledge at the last election.”
However, Sunak has previously shown he was willing to ditch party promises. In the spending review in November he abandoned a Tory pledge to devote 0.7 per cent of GDP to overseas aid and dropped a promise to lower the burden of public debt.
Sunak is expected to announce only limited tax hikes in the upcoming Budget, which is scheduled for 3 March, but larger increases could follow as the UK emerges from the pandemic. A second Budget is scheduled for November.
The Treasury declined to comment.