Rishi Sunak will have to slash public spending or hike taxes to fill huge black hole in government’s books after his latest £30billion coronavirus mini-budget, warns former Justice Secretary David Gauke
- Chancellor Rishi Sunak unveiled ‘plan for jobs’ which could cost up to £30billion
- It is the latest in a number of interventions to dampen the impact of coronavirus
- Institute for Fiscal Studies has said the country could face decades of tax rises
- It said that managing the debt would be task for this Chancellor and future ones
- Mr Gauke today said that ‘tax increases will have to do most of the heavy lifting’
Tax increases or spending cuts will be necessary to pay for Chancellor Rishi Sunak‘s plan to help the economy weather coronavirus, former treasury minister David Gauke said.
Mr Sunak announced a ‘plan for jobs’ which could cost up to £30billion on Wednesday, the latest in a number of measures to dampen the impact of Covid-19.
The Institute for Fiscal Studies (IFS) has said the country could face decades of tax rises to repair finances, adding that managing the elevated debt from the pandemic would be a task ‘for not just the current Chancellor, but also many of his successors’.
And Mr Gauke, who left the Commons last year, said ‘tax increases will have to do most of the heavy lifting’ when the Government tries to balance the books.
Rishi Sunak (pictured) announced a ‘plan for jobs’ which could cost up to £30billion on Wednesday, the latest in a number of measures to dampen the impact of Covid-19
Mr Gauke (pictured), who left the Commons last year, said ‘tax increases will have to do most of the heavy lifting’ when the Government tries to balance the books
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 wrote in the Observer: ‘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 per cent.
‘To give an indication of the scale of the undertaking, a £40billion 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 per cent.’
Mr Gauke added the Chancellor would have to set out his tax-raising strategy in autumn to provide certainty for business, adding it would be an ‘even tougher test’ than the last four months.