Tax rises may not be needed to pay for Covid – minister

Chancellor Rishi Sunak may not need to raise taxes to reduce the budget deficit built up by the pandemic, according to a Treasury minister.

Jesse Norman, Financial Secretary to the Treasury, told MPs that any post-Covid recovery could be strong enough to avoid tax rises.

He said: “It is not absolutely obvious that there may be any future need for consolidation depending of the view you take of taxes. I was struck by the remarks of some of the experts.

“Paul Johnson (from the Institute for Fiscal Studies) said he wasn’t absolutely sure that taxes needed to rise and I think that’s quite an interesting external view.”

It will be quite difficult because we may end up with a somewhat delayed but nevertheless very pronounced bounce. There are features of the economy that would suggest that could be quite significant

Official forecasts from the Office for Budget Responsibility (OBR) predict borrowing could reach £393.5 billion by the end of the financial year in March, which would be the highest seen since the Second World War.

However, the predictions were made before the latest national lockdowns and are now expected to rise.

Mr Norman said: “Let’s see where we get to. The OBR’s November forecast occurred before the latest lockdown.

“They’ll obviously be doing another forecast before this next Budget and we will have to see where they get to.

“Even after that, it will be quite difficult because we may end up with a somewhat delayed but nevertheless very pronounced bounce. There are features of the economy that would suggest that could be quite significant.”

Speaking to the Treasury Select Committee, he added that Chancellor Rishi Sunak may look for other ways to grow the economy that do not involve more taxation.

On Mr Sunak, he explained: “He is looking to build strong, sustainable public finances over the longer term when circumstances permit that and that seems to me to be a judicious recognition that some taxation could impede growth, could damage our recovery, could obstruct the transition from the extreme Covid circumstances we’re in at the moment back to something approaching normality and I think that’s a fair and proper recognition.”

His comments come following speculation that the Treasury is eyeing up a rise in corporation tax at the Budget in March and is looking at an overhaul of council tax.

Council tax is just one form of property tax... but it is certainly a matter we keep under review and is a topic of increasingly live political interest

Business groups have also been calling for a fundamental reform of business rates, which is charged on all commercial properties.

Mr Norman suggested a “tax day” could be held after the Budget to allow greater scrutiny of smaller measures announced to avoid changes being lost.

The minister also said the Treasury is trying to be more accountable and publish extra documents, after facing criticism in the past from the committee for a lack of transparency.

Mr Sunak has been accused of dodging scrutiny by failing to appear before the committee.

Mr Norman was asked several times for hints at whether tax rises will be in the Budget – including the suggestions of council tax and land tax changes – but declined to reveal details.

One problem could be the huge logistics needed to revalue residential properties under council tax reforms, with Mr Norman saying a revaluation “would be an enormous job”.

He added: “Council tax is just one form of property tax… but it is certainly a matter we keep under review and is a topic of increasingly live political interest.”