Sunak refuses to rule out raising income tax, VAT and national insurance
Increases in these big money-raising taxes would breach a Tory election pledge
Rishi Sunak, chancellor, has refused to rule out raising income tax, value added tax or national insurance — breaching a Conservative manifesto pledge — as new forecasts revealed a borrowing hole of about £30bn at the next election.
The so-called “triple lock” against these taxes increasing was a central part of Boris Johnson’s pitch at the December 2019 general election, but the Covid-19 crisis has forced ministers to rip up the promise.
Mr Sunak infuriated many senior Tories on Wednesday when he confirmed in his spending review that an election pledge to maintain overseas aid spending at 0.7 per cent of gross domestic product would be abandoned, saving £4bn next year.
On Thursday the chancellor faced questions about which other parts of the Tory manifesto would now be abandoned, including whether the promise not to raise rates for the big money-raising taxes — income tax, VAT and national insurance — was still sacrosanct.
Speaking on the BBC, he was evasive when asked about tax rises, only saying that the current level of spending was “unsustainable”. Asked if the tax lock still stands, he added: “I’m not going to be drawn on future fiscal policy.”
The revelation that government borrowing this year will hit almost £400bn has raised questions about how Mr Sunak will start to deliver what he claims is the Conservatives’ “sacred duty to future generations” to balance the books.
Mel Stride, Conservative chair of the House of Commons Treasury select committee, said it was inevitable the chancellor would look at the three taxes covered by the manifesto lock because they made up about two-thirds of tax revenue.
Mr Sunak claims he will not balance the books by returning to public spending austerity, but his spending review included a pay freeze for most public sector workers and other cuts that suggested tax rises alone will not be enough.
On Thursday Dominic Raab, foreign secretary, will face an angry response from some Tory MPs when he appears in the Commons to defend the “temporary” cut to the overseas aid budget.
However, Mr Sunak insisted that the cut was necessary to allow the government to fund the “priorities” of the British people, including health, education, infrastructure and defence. Early polling suggested the cut to aid spending was popular with voters.
The chancellor was asked to defend his priorities at the spending review, including a “pay pause” for a teaching assistant that coincided with a £4bn a year boost to defence spending.
He said it was “fair” for public sector workers to share the Covid-19 pain felt by workers in the private sector, adding that defence spending would create jobs, including in Scotland.
On Brexit, Mr Sunak insisted that Britain should not strike a deal “at any cost”, in spite of warnings from the independent Office for Budget Responsibility that a “no trade deal” outcome on January 1 could cut 2 per cent from the British economy next year.
“I remain hopeful and confident we can find a path to a deal,” he told the BBC’s Today programme. “If people retain a constructive attitude and approach these talks in a spirit of goodwill, I think we can get there.”