Tax  

Treasury minister non-committal about tax rises post-Covid

Treasury minister non-committal about tax rises post-Covid
 Credit: Hollie Adams/Bloomberg

Financial Secretary to the Treasury Jesse Norman has remained non-committal about the need for tax rises in a committee meeting on tax after coronavirus.

In an evidence session yesterday (January 18), Treasury Committee chair Mel Stride asked Mr Norman on whether the country was not “quite clearly” in the territory of having to raise taxes at some point to help plug the deficit.

The Office for Budget Responsibility (OBR) has forecast a budget deficit of £394bn in 2020/21, around £280bn of which arises from the government’s response to the coronavirus and support measures for businesses, workers and incomes.

But Mr Norman said: “If you look at the OBR’s document between the optimistic and the central and the pessimistic scenarios, the optimistic scenario has us returning to the growth path they had anticipated in March.

“And it’s not absolutely obvious therefore that there may be any future need for consolidation depending on the view you take of taxes.”

While Mr Stride continued to ask whether it was possible that we could be “absolved” of any requirement to raise taxes at all if we ended up at the “better end” of expectations, the Treasury minister maintained his stance. 

Mr Norman replied: “Let’s see where we get to, as I have said, the OBR’s November forecast occurred before the latest lockdown. They’ll obviously be doing another forecast before this next budget and we will have to see where they get to.

“And even after that it could be quite difficult because of course we may end up with a somewhat delayed but nevertheless very pronounced bounce, and there are features of the economy at the moment which would suggest that that could be quite significant.”

The committee chair remarked at the end of the session that tax rises were not a “done deal”.

Mr Stride said: “I take away from this that it’s not a done deal that there will be tax rises.

“There are possibilities out there in terms of our recovery that might see us avoid what probably a lot of people are expecting. That remains to be seen.”

The chairman also raised the issue of questions over whether the Conservative government was going to maintain its manifesto commitment on the triple lock.

But Mr Norman said it was a matter for the chancellor to address in the upcoming budget in March.

Mr Stride had questioned whether it was “really tenable” to be saying at this stage the commitment would be maintained under all circumstances, given that two-thirds of taxes are raised through national insurance, income tax and VAT.

chloe.cheung@ft.com

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