Rishi Sunak accused of ‘failing to level with public’ over tax hikes

Rishi Sunak has been accused of failing to ‘level with people’ over a £4 billion-a-year funding cut to public services, said an economic think-tank.

The Institute for Fiscal Studies (IFS) said the chancellor’s spending plans to recover the Covid-battered UK economy ‘do not look deliverable, at least not without considerable pain’.

Setting out the biggest tax-raising Budget for 28 years yesterday in the Commons, Mr Sunak insisted he must be ‘honest’ with the public about the financial challenges ahead.

Although the chancellor announced another £65 billion in Covid-19 support and a ‘super-deduction’ tax break for investment, IFS Director Paul Johnson said it was ‘of course a tale of two budgets’.

In a damning assessment, he said ‘Santa Sunak’ is ‘more like Scrooge Sunak’ after funding a squeeze of £50 billion – by freezing income tax allowances and hiking corporation tax – relative to his pre-pandemic plans of March 2020.

‘By the end of the forecast period, we are looking at a fiscal tightening of over £30bn relative to previous plans,’ added the IFS director.

Mr Johnson added: ‘The chancellor isn’t really levelling with people about the choices the government is making to repair the public finances…

‘How he is actually going to fix the public finances remains to be seen.’

It said the corporation tax increase from 19% to 25% by 2023 was a ‘gamble’ that ‘won’t have too terrible of an effect’ on much-needed business investment, while the tax threshold freezes were ‘screeching U-turns on Conservative policy’.

The IFS director pointed out that if spending plans are delivered, this would see public service funding slashed by £4 billion a year causing ‘additional pain’.

He said this adds to another £12 billion cut outlined in the last autumn Budget, which Mr Sunak failed to address during his speech.

The Treasury dismissed the £4 billion cut and said it was purely a mechanical change due to a lower inflation forecast. 

The real-time cuts will fall on ‘unprotected services’ such as local Government – including social care – and the Ministry of Justice in 2022-23, said the IFS.

‘But that’s only if you think these plans will actually be stuck to,’ added Mr Johnson.

‘Are we really going to spend £16 billion less on public services than we were planning pre-pandemic? Is the NHS really going to revert to its pre-Covid spending plans after April 2022?’

He said in reality pressures will be seen coming ‘from all sorts of directions’ with the NHS being the ‘most obvious’.

Mr Johnson added: ‘Further top-ups seem near-inevitable. Catching up on lost learning in schools, dealing with the backlog in our courts system, supporting public transport providers, and fixing our system for social care funding would all require additional spending.

‘The Chancellor’s medium-term spending plans simply look implausibly low.’