Not over yet! More tax rises to come after Rishi’s Budget spending spree – expert warning

Budget 2021: Adil Ray tells Rishi Sunak 'you didn't solve that problem'

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The Chancellor of the Exchequer Rishi Sunak revealed total spending is due to rise by more than £150bn over the remainder of the current parliament during the Autumn Budget 2021 yesterday, claiming “every single department” would see a real-term rise. But experts warn the Chancellor has taken advantage of a faster than anticipated economic recovery following the Covid pandemic to avoid departments facing a cliff edge as public finances returned to a sustainable footing. And the result could be more taxes.

Mr Sunak unveiled the contents of his Budget in the House of Commons on October 27 – setting out the Government’s tax and spending plans for the year ahead.

The Chancellor said his plans are focused on the “post-Covid” era and would pave the way for an “economy of higher wages, higher skills and rising productivity”.

He maintained his Budget had “cut taxes for millions of the lowest-paid”.

But the Office for Budget Responsibility said his plans make Britain’s tax burden now the highest rate since 1950.

A statement read: “Taking his March and October Budgets together, the Chancellor has raised taxes by more this year than in any single year since Norman Lamont and Ken Clarke’s two 1993 Budgets in the aftermath of Black Wednesday.”

The Chancellor has already hinted there are “challenging” months ahead; inflation in September was 3.1 percent and is predicted to increase to four percent over the coming year.

But while experts say this budget is a positive step forward for growth, there could be punishing tax burdens in the future if Mr Sunak’s proposals don’t go to plan.

Andrew Jackson, head of tax at accountancy firm Fiander Tovell, said tha while the Budget was focused more on helping working people and businesses recover rather than generating revenue, it could mean higher taxes are around the corner if Mr Sunak’s spending spree doesn’t pay off to result in high growth.

He told “It doesn’t seem to be a huge amount of a tax increase to claw back the costs of the pandemic, so we may well see more coming along over the next few years.”

Financial expert Jeremy Thomson-Cook, chief economist and head of FX at Equals Money agreed Britain does not need to claw back the costs of the pandemic yet.

Instead, he said the Bank of England’s continued quantitative easing programme would help alleviate the impact of this debt. But he, too, warned about what that could mean for our pockets in the future.

He said: “This is a Budget that is finely balanced on the belief that the UK will grow and grow well through the rest of this parliament.

“Any deviation from this risks the Chancellor missing his targets and coming back to taxpayers to ask for more cash”.

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The OBR said the Covid bill, including business support, households support and public services, stood at £303.4bn as of January 4, 2021.

In the March 2021 Budget forecast, this was increased to £343.9bn but as of the October Budget, this figure has now settled at £315bn.

And with such a huge amount to recoup, some experts say the budget was “something of an anticlimax”.

UK Business Forums (UKBF) founder Richard Osborne told “Whilst the Budget wasn’t the massive hikes and clawing back of COVID-19 business support costs that members of UK Business Forums feared it might be, it also didn’t give very much encouragement to the small and micro business owners either.”

While Laura Harper, a partner at private client practice Kingsley Napley says not enough is being done to claw back costs spent during the pandemic – in particular regarding gaps with education catch-up funding and Universal Credit reforms.

She added: “The number of people on company payrolls fell by 882,000 between February and November 2020 and unless UC claimants have been able to find alternative work, this Budget does little to help them.

“However, £640m a year has been pledged to help those who are rough sleepers and homeless.”

The Budget comes as the latest analysis by think tank Resolution Foundation found some families could end up paying £3,000 more in tax each year by 2026 thanks to measures introduced since Boris Johnson came to power.

Torsten Bell, chief executive, said: “The chancellor yesterday got his first chance to set out what the UK’s post-pandemic economy might look like by the mid-2020s.

“It is not the high-wage economy envisaged by the prime minister last month, or even the lower-tax economy that Rishi Sunak said was his goal yesterday. Instead, the chancellor has set out plans for a new high-tax, big-state economy.”

He added: “Higher taxes aren’t a surprise, given the UK is combining fiscal conservatism with an ageing society and a slow-growing economy.

“But it is the end of low-tax conservatism, with the tax take rising by £3,000 per household by the middle of this decade.”

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