The chancellor is reportedly expected to delay plans for tax rises until after his March budget as concerns rise over the huge economic impact of the pandemic, with cases of the new mutant strain of coronavirus spreading across the country.
Rishi Sunak has previously warned that government debt built up during the crisis could become unaffordable if there is a sudden increase in interest rates, and was expected to announce tax hikes in the spring budget.
However, a senior government source told the Times that it is the “wrong time” for tax hikes and any rise is likely to be pushed back until autumn at the earliest due to the discovery of the new strain of coronavirus.
“We’ll be in the midst of a recession and living under severe lockdown restrictions,” the source told the newspaper.
“The mutant strain of the virus has changed our entire perspective on this. It’s too soon.”
The government is expected to borrow £370bn this year and the Treasury has worked on proposals for potential tax increases, including cutting pensions tax relief for high earners, hiking capital gains tax and a new digital sales levy for online retailers.
Sunak announced earlier week that an additional £4.6bn in grants will be made available to retail, leisure and hospitality businesses that have been forced to close during the third coronavirus lockdown.
He has also not ruled out extending the furlough scheme beyond the current April deadline.