News

Budget 2020: Chancellor must raise taxes in first Budget, says IFS

Budget 2020: Chancellor must raise taxes in first Budget, says IFS
Business
The new chancellor must raise taxes in his first Budget or break the government s rules on borrowing, a leading economic think tank has warned.

Rishi Sunak is under pressure to increase spending on the NHS, social care and schools.

He has also inherited a fiscal target from his predecessor Sajid Javid to bring spending in to balance by 2022.

The Institute for Fiscal Studies has suggested this will not be possible without increasing taxes.

It said that loosening or abandoning the rules, set out in last year s Conservative election manifesto , would undermine the credibility of any fiscal targets the government set.

However, the Conservative election manifesto said the government would not put up income tax, national insurance or VAT.

Mr Sunak, who was appointed chancellor after Mr Javid s dramatic resignation in the cabinet reshuffle, will deliver the statement on 11 March.

The Budget is the government s yearly announcement of its plans for tax and spending for the coming financial year, which starts in April.

The chancellor is understood to be facing pressure from Prime Minister Boris Johnson and his chief advisor Dominic Cummings to loosen spending constraints.

The IFS said that even on current policy, borrowing next year could be £63bn, £23bn more than the most recent official forecast, putting Mr Javid s fiscal target in doubt.

Taking into account the government s commitment to increasing investment spending, it added that even getting the current budget into balance would not be enough to bring down underlying debt over the course of the Parliament.

Loosening or abandoning the current fiscal rule now would put debt on a clearly rising path, according to the IFS analysis.

"That would not be sustainable in the long-term," it said.

The IFS has suggested alternative ways for raising revenue, including lifting the freeze on fuel duty to give the government £4bn more in revenue throughout Parliament.

It also said abolishing entrepreneurs relief in capital gains tax and increasing council tax for those living in more expensive properties could form part of a "desirable package" of reforms.

But such schemes could prove politically difficult. Some 18 Conservative MPs - including those from seats won last year for the first time since the war - have written to the chancellor warning him that raising fuel duty would "clobber blue collar communities".

IFS director Paul Johnson said Mr Sunak should "recognise that more spending must require more tax".

He said the chancellor is "hemmed in" by a rising deficit and fiscal targets set out in the Conservative manifesto.

He added: "They will allow him to increase investment spending, which will be welcome if well targeted. But they will not allow substantial increases in current spending, or tax cuts, to be funded by more borrowing.
Read more on bbc.com
News Topics :
Similar Articles :
Business
Even a relatively benign no deal Brexit would push UK debt to its highest since the 1960s, the Institute for Fiscal Studies IFS has said. The think tank said borrowing was...
Business
The Budget has been announced for 6 November, with Chancellor Sajid Javid saying it will be the first budget after leaving the EU . This is the right and responsible thing...
Business
Mr Sunak himself told the BBC s Andrew Marr the government was looking at a range of scenarios and making sure it was well prepared for all of them. But...
Business
Annual tax rises of £40bn will be needed if the government wants to keep spending constant and balance its books by 2025, a think tank has warned. The Institute for...
Business
IFS director Paul Johnson said it left little room for election giveaways if the parties wanted to keep within the current spending rules. At some point it becomes unsustainable, you...