Rishi Sunak today reiterated his commitment to cutting taxes in the future, despite playing down claims he has styled himself as a low-tax Chancellor.
Responding to a grilling by MPs on the cross-party Treasury Select Committee, Sunak said his “priority at this point forward is to keep cutting taxes, not to increase public spending”.
However, when accused that he has characterised himself as a low tax Chancellor, he responded by saying “I’ve not actually said that”.
Last month, the Chancellor, delivering the annual Mais Lecture, said: “I firmly believe in lower taxes.”
The tax burden is scheduled to rise to its highest level since the late 1940s in a few years’ time, according to the government’s fiscal watchdog.
The Office for Budget Responsibility blamed “rising inflation outpac[ing] nominal earnings growth which, combined with net tax increases starting in April” for contributing to what is forecast to be the worst fall in living standards since 1956.
Sunak explained “the reason the tax burden is rising very simply is because public spending is also rising,” adding that over the course of the current parliament, public spending will increase 3.6 per cent in real terms, higher than previous levels.
Higher public spending either has to be financed through tax hikes or more borrowing.
The public books have been flooded with debt due to the government responding to the pandemic with measures such as the furlough scheme that cost billions of pounds.
Sunak is now trying to stabilise the public finances by hitting two fiscal targets in three years’ time, namely, achieving a current budget surplus and reducing the debt-to-GDP ratio.
Financing spending through borrowing more would reduce the likelihood of meeting these targets.
“An excessive amount of borrowing now is not the responsible thing to do,” the Chancellor said.