The Chancellor announced a "plan for jobs" which could cost up to £30 billion on Wednesday, the latest in a number of measures to dampen the impact
The Chancellor announced a “plan for jobs” which could cost up to £30 billion on Wednesday, the latest in a number of measures to dampen the impact of COVID-19.Writing in The Observer, Mr Gauke said “tax increases will have to do most of the heavy lifting” when the Government tries to balance the books.
We will need spending cuts, or given a decade of austerity, perhaps more likely some tax rises
He said the spending pledges would see government debt grow larger than the size of the UK economy, and the “political challenge” in increasing tax by the required amount would be “immense”.
He said: “Unlike the situation in 2010, it is hard to see that there are substantial savings to be made in Government spending.
“The one obvious exception is the pension triple lock – if wages are stagnant (or even falling) and inflation is negligible, it would be an act of intergenerational unfairness to increase the state pension by 2.5 percent.
“To give an indication of the scale of the undertaking, a £40bn tax rise would be the equivalent of an increase of 7p on the basic rate of income tax or raising the standard rate of VAT by 6 percent.”
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Mr Gauke, who left the Commons last year, said the Chancellor would have to set out his tax-raising strategy in autumn to provide certainty for business and warned it would be an “even tougher test” than the last four months.
Mr Sunak’s much-heralded £30 billion jobs package failed to prevent another slew of redundancies – with John Lewis, Boots, Burger King and Rolls Royce announcing thousands of jobs were at risk.
The Chancellor also received a warning from the head of HM Customs and Revenue that key elements of the plan may not represent good value for money.
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Rishi Sunak has unveiled a range of measures to help the economy through the coronavirus crisis
As part of Mr Sunak’s emergency measures announced on Wednesday, most homebuyers in England and Northern Ireland will not pay stamp duty on the first £500,000 of their purchase between July 15 and March 31.
The Institute for Fiscal Studies (IFS) has warned the country could face decades of tax rises to repair the broken finances and said managing the elevated debt from the pandemic would be a task “for not just the current Chancellor, but also many of his successors”.
Deputy director Carl Emmerson warned that the economy would probably not be as big as it would have been had the crisis not hit.
He said: “If that’s the case, and it’s very likely to be the case, revenues will still be depressed, and if we want to try then to bring the deficit back to where it would have been absent the crisis, we will need to do some spending cuts, or given a decade of austerity, perhaps more likely some tax rises.
“It’s going to take decades before we manage that debt down to the levels we were used to pre this crisis.”
Earlier Mr Sunak admitted he was “anxious” about the state of the UK’s economy which is “entering into a very significant recession” because of the crisis.
He said: “We’ve moved through the acute phase of the crisis where large swathes of the economy were closed.
“We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going.
“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again.
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“We have to rediscover behaviours that we’ve essentially unlearned over the last few months.
“But unless activity returns to normal, those jobs are at risk of going which is why we acted in the way that we did.”
Mr Sunak told the Commons in what amounted to a mini-Budget the Government would do “all we can” to keep people in work after the economy contracted by 25 percent in just two months.