Tensions are set to rise between Boris Johnson and Rishi Sunak as the government looks for ways of patching up Britain’s Covid-hit economy. The duo appear to be on conflicting paths as they try to plug a £400 billion financial hole as a result of the pandemic.
The prime minister seems to have been hinting at tax cuts, but the chancellor is reportedly looking at raising taxes. Analysts foresee trouble ahead as the government attempts to get the economy back on track in the March Budget.
Fears they may be on a collision course began after Mr Johnson told a Facebook question and answer session in December he would look at the tax environment and consider everything that could be done to “encourage and support business”.
If the prime minister is leaning towards reducing business taxes to bolster the economy, this will be a blow to Mr Sunak, who is said to be keen to bring order back to the economy, using the Budget as a turning point.
He has already hinted at impending tax increases in March, stating current spending is “clearly unsustainable” and noting the government’s “responsibility” to turn the situation around, once the emergency has passed.
Public finances watchdog the Office for Budget Responsibility has warned of the long-term damage caused by the Covid-19 crisis, foreseeing public debt continuing to rise. It fears the government will fail to balance the budget and has no plausible measures in the pipeline.
Meanwhile, the Wealth Tax Commission, a body made up of policymakers, tax practitioners and academics, has suggested the government should consider taxing the wealthy to compensate for the coronavirus crisis.
It estimates taxing millionaire couples an extra 1% above a £1 million threshold will raise £260 billion over five years. A one-off “wealth tax” has been used in the past after a major crisis, including in Germany, France and Japan after World War II.
Anti-poverty charity Oxfam has described making the poorest people in society pay for the Covid crisis as “morally repugnant” when a “fair tax on the richest” could make a big difference.