Public backs new taxes on wealthy and business to pay for Covid debt

Andrew Woodcock
·7-min read
<p>Rishi Sunak will use Wednesday’s statement to tell voters he wants to be ‘honest’ with them about the need for consolidation measures to redress the perilous state of the public finances  </p> (Reuters)

Rishi Sunak will use Wednesday’s statement to tell voters he wants to be ‘honest’ with them about the need for consolidation measures to redress the perilous state of the public finances

(Reuters)

Voters want chancellor Rishi Sunak to target big business and the wealthy for tax hikes to pay for his massive spending splurge on coronavirus support, according to a new poll.

But the Savanta ComRes survey also suggested the public are steeled to bear some of the burden of relieving what Mr Sunak describes as “enormous strains” on UK finances, with a majority saying they are willing to accept a rise in income tax rates.

It came as the chancellor risked a clash with Conservative backbenchers by signalling that tax rises are on the way, promising to “level with people” about the country’s exposure to a spike in interest rates at a time when national debt stands above £2 trillion for the first time in history.

Published in The Independent just days ahead of the 3 March Budget, the poll showed strong support for the chancellor’s expected plan to increase the main rate of corporation tax for the first time since 1973, with 55 per cent backing it and just 16 per cent opposed.

Meanwhile, some 55 per cent said they would support the introduction of a “wealth tax” on property or assets to help pay down the debt mountain, compared to just 18 per cent against.

While there was stiff resistance to raising council tax, VAT or fuel duty or reining in future pension rises, the poll found 43 per cent ready to see income tax rates go up by 1p as part of a belt-tightening package, against just 28 per cent opposed. In a finding which may give Mr Sunak more political room for manoeuvre, Conservative voters backed a corporation tax increase by 61 per cent to 16 and an income tax rise by 51 per cent to 28.

The findings came as it emerged that the budget will deliver a £5bn boost to pubs, restaurants, shops and other businesses hit hard by the pandemic, to help them reopen as the third lockdown is eased over the coming months.

Non-essential retailers, due to reopen from 12 April at the earliest, will be entitled to “restart grants” worth up to £6,000 per premises. And hospitality venues, hotels, gyms and personal care and leisure firms, which must wait longer to return to normal operations, will be eligible for as much as £18,000 each.

The chancellor will also announce an initial £12bn of capital and £10bn of government guarantees for the UK Infrastructure Bank to support £40bn of public and private sector infrastructure projects.

The Savanta ComRes poll made clear there is little appetite for a swift end to the £280bn package of benefit uplifts, business support and furlough payments which the chancellor has deployed to protect businesses and jobs during the Covid-19 pandemic.

He is expected next week to extend support in line with the roadmap out of lockdown set out by Boris Johnson on Monday, which set 21 June as the date for the final lifting of most restrictions.

But the survey suggests that many voters would like him to go further, with numbers wanting support schemes wound down as soon as possible dwarfed by those who want them kept going until the summer, the end of 2021 or beyond.

Mr Sunak will use Wednesday’s statement to tell voters he wants to be “honest” with them about the need for consolidation measures to redress the perilous state of the public finances.

He will say that, while historically low interest rates make borrowing cheap, the scale of the UK’s debts leaves it exposed to small movements – with a hike of just one percentage point across all rates adding £25bn to the annual cost of servicing them.

“There are some people who think you can ignore the problem,” said the chancellor. “And, worse, there are some people who think there isn’t a problem at all. I don’t think that.

“That is why I talk about levelling with people about the public finances and our plans to address them.”

Mr Sunak is mulling a gradual increase from 19 to 23 or even 25 per cent in the UK’s corporation tax, which he believes – despite likely howls of pain from business – would not significantly harm competitiveness with other major developed nations.

Any rise announced on Wednesday is likely to be phased in over a number of years, with other more “stealthy” revenue-raising measures under consideration also believed to include a freeze on income tax thresholds to bring more workers into higher bands and a cap of just over £1m on lifetime pension allowances.

But he risks a showdown with Tory backbenchers from the red wall seats in the north of England won from Labour in 2019, who are urging him to focus on investment to help the UK grow its way out of the financial doldrums.

Carlisle MP John Stevenson said Tories were looking for “continuing support for the economy, for families, for business” in the Budget, adding that it was “too early right now” for tax rises. And Barrow and Furness’s Simon Fell said backbenchers were ready to be “an absolute nightmare for the chancellor” with demands for ”more money to be spent intelligently in our communities”.

Former chancellor Kenneth Clarke warned that Mr Sunak risks “financial crisis” if he fails to raise taxes, and must target income tax, national insurance and VAT, despite 2019 manifesto promises to leave their rates unchanged for the parliament.

“This is the taxpayer’s debt that we’re piling up now,” said Lord Clarke. “If we don’t actually get it under control and signal how we are going to get back to fiscal common sense before inflation comes back and interest rates go up, we’ll face a financial crisis.”

The poll indicated public sympathy for business pleas to avoid a “cliff-edge” end to coronavirus support at the conclusion of Mr Johnson’s roadmap, when many will face months of slow recovery before breaking even as well as the requirement to pay back loans built up during lockdown.

Some 36 per cent of those taking part said furlough payments – worth up to 80 per cent of wages for employees who cannot work – should continue to the summer, 28 per cent to the end of the year and 13 per cent indefinitely.

Some 21 per cent, more than one in five, said that the £20-a-week temporary boost to universal credit payments should be made permanent, and another 22 per cent said it should not be withdrawn before the end of 2021.

And a total of 43 per cent said that VAT breaks for hospitality and tourism should be kept at least until the end of the year, while 41 per cent said the same about support for the self-employed and 40 per cent for business rates holidays, compared to 42, 48 and 45 per cent respectively who said they should end by the summer.

Savanta ComRes associate director Chris Hopkins said: “The sense from the public that, despite the roadmap, Britain is not out of the woods with coronavirus yet is reflected in their desire to see financial support extended to allow businesses and people navigate the final stretch of the pandemic.

“When it comes to funding such support, though, the public unsurprisingly favour taxes that directly affect consumers less, including a corporation tax that is always sure to please voters, but is unlikely to get the support of too many within the Conservative Party.”

Mr Sunak said that his £5bn of restart grants will “ensure our high streets can open their doors with optimism” as the roadmap lifts restrictions, offering “light at the end of the tunnel”.

The UKHospitality trade body welcomed the plan, saying many firms are “struggling to see how they could survive” through the coming months, with venues such as nightclubs remaining closed until 21 June at the earliest.

Chief executive Kate Nicholls said: “Cash reserves have been severely depleted after a year of closure and restrictions and these grants are a very welcome boost, putting the sector in a better place to restart.

“Businesses are crying out for the cash now so there can be no further delays which might make it too late for some.”

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