LONDON (Reuters) – British finance minister Rishi Sunak has ruled out raising the rate of income tax, value-added tax or National Insurance to strengthen public finances, the Financial Times reported on Monday, citing an unnamed aide to Sunak.
Britain’s Conservative Party promised before December 2019’s election not to raise the rates of these three taxes, which account for almost two thirds of government revenue.
However the coronavirus pandemic has put public borrowing on track to reach 400 billion pounds ($547 billion) in the 2020/21 financial year, and to remain high thereafter, leading to calls from some outside analysts to rethink the tax pledge.
The Financial Times said Sunak did not plan to start laying the ground for increased tax rates at his next budget on March 3, meaning the focus would need to be on other taxes.
“To go back on the manifesto pledge would be a betrayal of trust – pandemic or no pandemic,” the newspaper quoted an unnamed aide to Sunak as saying. “It was a very significant pledge at the last election.”
Options for Sunak could include increases in corporation tax or freezing thresholds for income tax exemptions, rather than raising them in line with inflation, the newspaper said.
A finance ministry spokesman declined to comment on the report ahead of the budget.
In October the International Monetary Fund said Britain was likely to need to raise taxes to plug a persistent budget deficit that it expected to remain after the pandemic ended, but said increases should not begin until recovery was durable.
Most economists expect Britain’s economy will shrink during the current quarter due to lockdown restrictions.
Last month Sunak reiterated that he wanted to “return the public finances to a more sustainable footing” once the economy began to recover.
($1 = 0.7317 pounds)
(Reporting by David Milliken; Editing by Nick Macfie)
