The better off could be hit with the largest tax rises in a generation
Hikes to Corporation tax and capital gains tax are being considered along with cutting pension tax relief and a raft of other revenue-raising measures to plug the gap in the nation’s finances. Money could also be clawed back from Foreign Aid. The proposals are reportedly set to play a central part of the Chancellor’s Budget in November.
But the move was slammed by campaigners, experts, backbench MPs and business leaders.
John O’Connell, the chief executive of the TaxPayers’ Alliance said that slashing tax relief on pension contributions is a “terrible idea.”
While former Pensions Minister Sir Steve Webb said targeting pensions relief would be damaging for the government.
Sir Steve, now a partner at pension specialists Lane, Clark and Peacock, said: “This is worrying if you are nearly retired because any reductions will affect your pension pot when you retire.”
He pointed to the one million people over the retirement age who still work and could also be affected by any changes.
Rishi Sunak and Stephen Barclay
“But I think this is a kite-flying exercise. The Treasury will fly a few ideas and see which ones get the most backlash and drop them.”
Former Cabinet minister Damian Green, below, who served as then prime minister Theresa May’s de facto deputy, said he was wary about any changes to the so-called pensions “triple lock”.
The lock means the state pension increases each year in line with either wages, inflation or 2½ percent, depending on which of the three figures is highest.
Mr Green told Times Radio: “I would be very wary of the Government going down that route.
“It was a manifesto commitment to keep it.
“Clearly the Chancellor faces some unpalatable options because he’s rightly spent many, many billions of pounds supporting the economy and individual workers over the past few months.”
Fuel and other duties could be raised and an online sales tax could also be introduced to help plug any gaping holes in the economy, and prop up high street shops – who have to pay business rates.
A revamp of the inheritance tax system and the introduction of an online sales tax is also being considered.
Chief Secretary to the Treasury, Stephen Barclay, refused to be drawn on reports on the tax hikes.
Mr Barclay told Times Radio: “Treasury ministers don’t get into what a Budget will or will not do.
“And particularly on tax measures ahead of that, that’s for the Chancellor, the Budget.”
He added: “There is always four moving parts to this.
“The key objective within the Treasury is to get growth.
“There is then a balance between the other three moving parts of debt, of spending, spending feeding into that, and tax.
“And what’s your trade-off then between your spending measures and your tax measures.
“The real objective is to reduce the economic scarring from Covid.”
The Chancellor is specifically understood to be looking at hiking corporation tax from 19 percent to 24 percent to raise £12billion next year and £17billion in 2023-2024.
Adam Marshall, Director General at the British Chambers of Commerce said: “Hammering businesses, entrepreneurs and investors with big tax rises is no way to help the UK economy restart, rebuild and renew. Rishi Sunak must consider risks to our still-fragile recovery.”
And Tory MP Marcus Fysh hit out saying that a raid on taxes was the “wrong response to the current situation.”
The international development budget could also be caught up in the shake-up.
The aid budget has already been cut by £2.9 billion from £15.8 billion this year, due to the contraction in the economy caused by the COVID-19 outbreak.
However, the Government insists it still meets its obligation to provide 0.7 per cent of gross national income (GNI) to international development.
The Office for National Statistics has said the UK was hit harder in the first half of the year than any other G7 economy – with only Spain enduring a worse downturn.
Despite this Britain’s economic recovery following the pandemic has gathered pace, but the government borrowed a record £127.9 billion between April and June and is keen to encourage workers back to their offices to fend off further job losses.
Mr Sunak has already indicated that some taxes will need to rise over the medium term.