‘There won’t be a tax grab’: Rishi Sunak vows to carry on spending

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‘There won’t be a tax grab’: Rishi Sunak vows to carry on spending and will wait for the ‘fog’ of coronavirus pandemic to lift before he starts to make savings

  • Chancellor acknowledged that the pandemic had triggered an ‘economic shock’ 
  • He said that this would require tough decisions on tax and spending in future
  • But he played down reports that major tax rises could be brought in next year 

By Jason Groves Political Editor For The Daily Mail

Published: | Updated:

Rishi Sunak vowed to carry on spending yesterday as he hinted that major tax rises will be delayed until the ‘fog of uncertainty’ caused by Covid has cleared.

In a series of interviews ahead of this week’s comprehensive spending review, the Chancellor acknowledged that the pandemic had triggered an ‘economic shock’ that would require tough decisions on tax and spending in future.

But he played down reports that major tax rises could be brought in as early as the Budget next spring.

Mr Sunak said he was already ‘doing the work’ on a costly new scheme to ‘incentivise’ employers to take on extra staff in the New Year. And officials were working on a ‘range of other schemes’ designed to copy the success of Eat Out To Help Out.

Rishi Sunak vowed to carry on spending yesterday as he hinted that major tax rises will be delayed until the ‘fog of uncertainty’ caused by Covid has cleared

The Treasury last night confirmed that the Chancellor will also press ahead with billions of pounds of additional spending on schools, hospitals, colleges and prisons to meet Tory election pledges. 

However, the foreign aid budget is likely to be trimmed by at least £4billion under plans to ‘temporarily’ jettison the vow to spend 0.7 per cent of national income on aid.

And Mr Sunak is set to press ahead with a pay freeze for five million public sector workers, sparking a new strike threat from the TUC.

 But he ruled out wider spending cuts, saying: ‘You will not see austerity next week, what you will see is an increase in Government spending, on day-to-day public services, quite a significant one coming on the increase we had last year.’

In a series of interviews ahead of this week's comprehensive spending review, the Chancellor acknowledged that the pandemic had triggered an 'economic shock' that would require tough decisions on tax and spending in future

In a series of interviews ahead of this week’s comprehensive spending review, the Chancellor acknowledged that the pandemic had triggered an ‘economic shock’ that would require tough decisions on tax and spending in future

Treasury officials are looking at potential tax hikes in future, including cutting pension tax relief for higher earners and raising capital gains tax.

Middle-class may be hit by pensions relief raid

The Chancellor is mulling over reviving plans for a raid on middle-class pensions that would save him £4billion a year – amid £2.08trillion of national debt.

Mr Sunak is said to be ‘very attracted’ to a 25 per cent flat rate of pensions tax relief.

Under the current system, those saving for a pension receive relief at the same rate as their income tax. It means basic rate taxpayers receive relief at 20 per cent and higher rate taxpayers at 40 per cent.

Pensions experts yesterday said the proposed raid could be awkward as doctors would be hit – as the Treasury also threatens to freeze public sector pay.

Mr Sunak will unveil his spending review on Wednesday. Meanwhile the British Medical Association claims that more than £10billion in extra NHS funding is needed – just to tackle the care backlog caused by coronavirus.

But asked about potential tax rises yesterday, Mr Sunak said: ‘There’s an appropriate time to get public finances on a sustainable track. 

Right now the right economic response is to focus on tackling the virus. 

‘It wouldn’t be right to try and make them now in the fog of enormous economic uncertainty.’ 

This week, Mr Sunak will publish forecasts suggesting the UK is on course for a budget deficit nudging £400billion – almost three times the level seen at the height of the financial crisis.

Meanwhile, plans for a freeze on public sector pay continued to generate outrage from trade unions yesterday. 

Nurses and doctors are set to be exempted due to their heroics during the pandemic. 

But asked about possible strike action, TUC general-secretary Frances O’Grady told Sky News: ‘Governments only seem to recognise the true value of labour when it’s withdrawn… nobody can rule anything out at the moment.’

The Treasury last night said Mr Sunak would unveil an extra £1.25billion for new prisons, taking the total to £4billion over the next four years. 

This will create 18,000 additional places.The Chancellor will also confirm previously announced pledges to spend £3.7billion on new hospitals, £1.5billion on further education colleges and £2.2billion on schools.

Asked yesterday if he needed someone to fine the PM when he spends too much, Mr Sunak joked: ‘I like that idea. I should take his credit card away.’