The Chancellor is reportedly set to announce tax rises in his March budget – a year on from when the pandemic first plunged the UK into lockdown.The country has edged towards a ‘double-dip’ recession after November’s slump ended six months of growth. The Office for National Statistics said GDP fell by 2.6 percent month on month in November, coinciding with the closing of non essential retail and the hospitality sector. Scotland, Wales and Northern Ireland also endured tougher restrictions resulting in another economic hit. The country will soon learn the full impact of the third lockdown, implemented at the end of 2020, but Mr Sunak is already planning ways to pay for the pandemic.
Reports from last November suggest the middle classes will bear the brunt of the bill, with Mr Sunak now set to break a second manifesto pledge from the 2019 general election.
He had already announced plans to cut international aid spending from 0.7 percent of GDP to 0.5 percent, and the Chancellor could break the promise of no tax hikes.
The claims were reported by iNews, who outlined that one measure being considered by the Chancellor was changing VAT zero rates by reducing the number of items that do not incur the tax.
James Smith, research director of the left-leaning Resolution Foundation, added: “While the Chancellor was at pains to avoid talk of tax rises, there is widespread consensus that they are coming once the recovery from Covid has been secured – both to repair the public finances and grapple with big non-Covid challenges, such as an ageing population and transitioning to a low carbon economy.”
Tax Research UK’s Richard Murphy told Express.co.uk last year that raising taxes to try and recover from the pandemic could spark a “depression rather than a recession”.
He said: “At first, Rishi Sunak completely underestimated what was going to happen, it was a complete disaster, because he hadn’t realised how disastrous coronavirus was going to be.
“But he was back a week later with the furlough scheme, it was smart, quick, some people lost out when they shouldn’t have done.
“Now Sunak’s obsession with debt is kicking in again.
“If he opts for austerity and tax hikes, then frankly we are heading for depression rather than a recession.”
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Grim readings from The Office of National Statistics report on the economy in November highlight the challenges the UK economy must overcome.
Across services, the monthly fall was widespread but driven by accommodation and food and beverage services, wholesale, retail and motor trades, other service activities, and arts, entertainment and recreation, the report said.
It added that manufacturing grew, but this was offset by falls across mining and quarrying, energy and water and waste.
Construction output in November 2020 was 0.6 percent above February 2020, with repair and maintenance work 7.4 percent above and new work 3.1 percent below its pre-pandemic level.