(Bloomberg) -- U.K. Treasury officials are pushing for significant tax increases to raise at least 20 billion pounds ($27 billion) a year and plug the swelling budget deficit, according to news reports, a move that would hit the voters who’ve traditionally formed the backbone of the Conservative Party.
Citing multiple sources, the Telegraph reported late Saturday that proposals under consideration include aligning capital gains tax with income tax, slashing pension tax relief, raising fuel and other duties, introducing an online sales tax and changing the inheritance tax system.
Measures to raise taxes on capital gains and company earnings will form the centerpiece of Chancellor of the Exchequer Rishi Sunak’s budget in November, the Times reported. The corporate rate could rise to 24% from 19%. Sunak’s deputy, Steve Barclay, the chief secretary to the Treasury, declined to comment on the reports on Sunday, saying the government is trying to drive growth while keeping an appropriate balance among debt, taxation and spending.
“The real objective is reduce the economic scarring from Covid,” he said on Times Radio. “What we’re focused on is how do we get the economy firing up again.”
According to the Telegraph, the moves are largely being resisted by Boris Johnson’s office, suggesting another headache for the prime minister as parliament returns this week from its summer recess.
He’s already under pressure from his party for his muddled handling of getting England’s schools to fully reopen and whether students should wear masks, while his forthcoming campaign to get people to return to the office faces heavy opposition from the workforce.
Adam Marshall, director-general of the British Chambers of Commerce, said the reports of the possible tax hikes were concerning and would be a “damaging mistake” by the Treasury.
“We do not want to make a choice between a strong recovery with lots of investment and risk-taking by businesspeople, or a short-term repair of the public finances,” he said on Times Radio. “We’ve got to give the recovery space to build and grow.”
The reported plans were also criticized by the TaxPayers’ Alliance, a lobby group that campaigns for lower taxes, which said in a statement that they would “kick the private sector while it is down.”
Also of potential concern to Tory lawmakers, an Opinium poll in the Guardian newspaper late Saturday suggested the Labour Party has drawn level with the Conservatives. The Tories held a 26-point lead before the lockdown was imposed in March.
Sunak’s spending splurge to buoy an economy ravaged by the coronavirus is set to inflate the budget deficit to 350 billion pounds in the current fiscal year, according to figures last month from the Resolution Foundation and the Institute for Fiscal Studies. That would be equivalent to about 17% of economic output.
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(Updates with Barclay comment, reaction from third paragraph.)
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