Sunak’s Budget set to be a mix of tax rises and Covid cash giveaways
Rishi Sunak’s Budget next week will reportedly be characterised by a mixture of Covid support extensions and tax rises, with few extra funds for day-to-day departmental spending.
This is set to include a £30bn package to extend current Covid support schemes – including the furlough scheme, VAT cut for retail and hospitality, stamp duty exemption and business rates holiday – until September, which would bring the UK’s Covid spend to more than £300bn and the Budget deficit to around £400bn.
This would be the highest proportional spend since World War II.
Sunak is also expected to announce an incremental increase in corporation tax from 19 per cent to 25 per cent to help pay off the government’s 2020 spending.
Each extra percent of corporation tax will bring in an extra £3.3bn of government revenues.
The Financial Times reports today that Sunak will say Joe Biden’s planned increase in corporation tax to 28 per cent shows the necessity of the move and that his increase to 25 per cent will mean the UK still has the lowest rate of corporation tax in the G7.
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The tax rises and Covid support spending is expected to make up the most significant parts of the Budget, with the chancellor unlikely to make much more money available for government departments or major infrastructure projects.
Treasury insiders have told The Sun that the Budget will resemble “two big slices of bread with very thin jam”.
Labour leader Sir Keir Starmer yesterday pushed Boris Johnson to rule out capital gains tax, saying that “now is not the time for tax rises on families and businesses” at Prime Minister’s Questions (PMQs) yesterday.
Labour has argued that any potential tax rises and Budget consolidation should be put off until after the UK’s economic recovery is well underway.