Rishi Sunak has been, understandably, praised by many in recent months as he has done “whatever it takes” to keep the economy afloat. Since March, the chancellor has launched several support packages aimed towards mortgage holders, employees and the self-employed.
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That support has been continuingly expanded and increased since, with the latest additions being made yesterday.
In a “mini” budget, Rishi provided consumers with a voucher scheme for dining out, employers with a furlough bonus scheme and property purchasers with a generous tax cut.
This has all been deemed as necessary given the current environment but it has created a debt burden which will eventually need to be addressed.
Nigel Green, the Chief Executive and founder of deVere Group, provided a warning on the country’s long-term obligations: “The Chancellor Rishi Sunak has set out a series of extra measures to help kick-start the UK economy, whilst revealing that the Treasury has allocated £188billion of economy-bolstering measures since the start of the Covid-19 pandemic.
“He has galvanised his position as Santa Sunak and has, rightly, been praised for his handling of the economy; he has done an impressive job.”
“But what happens when, in the Budget in November, he is forced into becoming Scrooge Sunak to pay for his record-beating level of support measures?”
Many people will be likely be worried about the prospect of tax increases to cover the debt, which is expected to eventually reach £300billion in total.
Unfortunately, this fear may become a reality, as Nigel expanded on how tax increases could be introduced: “Taxes on income contribute the highest proportion of the government’s tax-take, meaning even a small change would have a disproportionately positive impact for the Treasury.
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“But they will not want to be hitting household incomes too much at this stage, as it will move to raise taxes in the medium to longer-term in order to indicate to financial markets that they are intent on controlling the deficit.
“There is also the potential of the oft-mooted one-off or continual tax on personal wealth.”
Back in May, the deVere boss revealed that he expected pensions to become a key target for the coronavirus deficit: “It is almost inevitable that pension tax relief will be a target as the government looks to plug gaps in November’s Budget.
“As it’s likely the pension contribution relief for those on higher incomes will be reduced, an increasing number of people are now mulling making a larger one-off contribution before the Budget, in order to benefit from the higher tax relief whilst they still can.”
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Mr Sunak touched on the plan for covering the debt long term in yesterday’s announcement, detailing that a phased plan was in motion.
As he explained in parliament: “If the first phase of our economic response was about protection…
“And the second phase – the phase we are addressing today – is about jobs…
“There will come a third phase, where we will rebuild.
“My Right Honourable Friend the Prime Minister has set out our vision to level up, unite the country, spread opportunity, and repair and heal the wounds exposed through this crisis
“I can tell the House we will produce a Budget and Spending Review in the autumn. And, we will deal too, with the challenges facing our public finances.
“Over the medium-term, we must, and we will, put our public finances back on a sustainable footing.
“In other words, our Plan for Jobs will not be the last action – it is merely the next – in our fight to recover and rebuild after coronavirus.”
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