Finance

Rishi Sunak may need to raise taxes by £60billion to stabilise the economy

Rishi Sunak, the Chancellor of the Exchequer, is currently facing a particularly difficult set of financial circumstances as the country continues to reckon with the impact of COVID-19. Government borrowing has been particularly high in order to meet the demand for financial support during this difficult time. And with some assistance measures potentially continuing into 2021, it is clear the financial strain on the government will be great.

However, bombshell new research has revealed significant tax rises of £60billion will be necessary for the Chancellor to enact, in order to rescue Britain’s economy.

The Office for Budget Responsibility (OBR) has said the government will either need to drastically raise taxes, or slash spending to stop a catastrophe for the economy.

Analysis revealed the economy is set to shrink by 12.4 percent in 2020, in bad news for the country’s economic outlook.

And it is anticipated government borrowing will reach its highest levels in peacetime Britain to cope with the unfolding crisis.

READ MORE: Britons face tax ‘reckoning’ to cover cost of lockdown crisis

The analysis undertaken by the watchdog also showed the economy may not return to pre-COVID-19 levels until the end of 2022.

And there are also likely to be high levels of unemployment at the end of this year. 

However, what is undoubtable is that the Chancellor and the Treasury will be discussing the options available in the weeks and months to come.

Many hope tax rises will be minimal, however, the money has to be recouped from somewhere.

Robert Chote, the OBR chair, said: “In practice, no government could allow net debt to persist for long on these explosive paths, as it would find it hard to finance its mounting deficits.”

It was speculated that Mr Sunak would announce changes to taxation within his recent summer economic update.

However, the Chancellor avoided this tack, and instead chose to focus on the creation and sustenance of jobs throughout the country.

Mr Sunak announced approximately £30billion worth of spending in a bid to stop unemployment as much as possible. 

However, a recent survey revealed many Britons were in fact willing to pay higher taxes in order to fund the COVID-19 pandemic response.

In a study, undertaken by AJ Bell, of Britons at the end of May 2020, 77 percent of those asked said they would be willing to pay extra income tax.

And on average, the 2,001 respondents said they would be happy for their bill to increase by 3.9 percent. 

Over a third said capital gains tax, now under review by the Chancellor, was the “most acceptable” option for higher taxes.



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