Rishi Sunak could delay big Budget decisions until the Autumn amid fears over the impact of the Coronavirus, it was claimed today.
The Chancellor is due to deliver his first financial package on March 11, as the government vows to ‘level up’ the UK after Brexit by pumping billions into services and infrastructure.
But Mr Sunak, who only took over from Sajid Javid in the role a fortnight ago, is expected to scale back the announcements in light of mounting uncertainty over growth forecasts.
Treasury aides are now referring to the Budget as part of a ‘trilogy’ of major set-pieces this year, according to the Financial Times.
Mr Sunak instead wants to focus on delivering specific pledges from the Conservatives’ manifesto at the election before Christmas.
Rishi Sunak (pictured) is due to deliver his first Budget to the House of Commons on March 11
Boris Johnson (left) and Dominic Cummings (right) are thought to be pushing for Mr Sunak to loosen the purse strings in the Budget
The package next month will confirm that a slated cut in corporation tax is being shelved.
It is also set to slash the entrepreneurs’ relief on capital gains tax, helping to fund a promised rise in the threshold for national insurance and free up extra cash for the NHS.
He is widely expected to tinker with the fiscal rules that were set by his predecessor Sajid Javid just a few months ago – giving the government more wriggle room to turn on the spending taps.
‘The Chancellor’s view was vert clear from dayt one – this Budget needs to do what we promised and deliver on the manifesto. It’s about trust,’ one official told the FT.
‘It’s no secret that we are looking at a challenging economic context. We’ve seen a global slowdown over the past year and of course we’ll have to see the economic impact of Coronavirus.’
The respected Institute for Fiscal Studies (IFS) today warned that loosening or abandoning the rules, set out in last year’s Conservative election manifesto, would undermine the credibility of any fiscal targets the Government set.
During the election campaign, Mr Javid committed to run a balanced budget for current spending within three years.
But following his dramatic promotion in the Cabinet reshuffle, Mr Sunak has been under pressure from Mr Johnson and his chief adviser Dominic Cummings to loosen the spending constraints.
The IFS said that even on current policy, borrowing next year could be £63billion, £23billion more than the most recent official forecast, putting the manifesto target in doubt.
With the Government committed to increasing investment spending, it said that even getting the current budget into balance would not be enough to bring down underlying debt over the course of the parliament.
Loosening or abandoning the current fiscal rule now would put debt on a clearly rising path.
‘That would not be sustainable in the long term,’ the IFS analysis warned.
The Conservative election manifesto also committed the Government not to put up income tax, national insurance or VAT.
Mr Sunak, who only took over from Sajid Javid (pictured) in the role a fortnight ago, is expected to scale back the announcements in light of mounting uncertainty over growth forecasts.
However, among the alternative ways for raising revenue, the IFS said abolishing entrepreneurs’ relief in capital gains tax and increasing council tax for those living in more expensive properties could form part of a ‘desirable package’ of reforms.
It said that in 2017-18 alone, three quarters of the £2.3billion cost of entrepreneurs’ relief went to just 5,000 individuals with an average tax saving of £350,000 each.
At the same time, the IFS said restricting pensions tax relief to the basic rate would bring in more than £11 billion, although it suggested there were better ways of reform.
It also pointed out that continuing to freeze fuel duty would cost the Treasury £4billion by the end of the current parliament.
IFS director Paul Johnson said Mr Sunak’s first Budget would now set the direction of Government policy for the next five years.
‘If this new Government is going to make radical change to taxes and spending this surely is the time to do it,’ he said.
‘The Chancellor is hemmed in by a rising deficit and fiscal targets set out in the Conservative manifesto.
‘They will allow him to increase investment spending, which will be welcome if well targeted. But they will not allow substantial increases in current spending, or tax cuts, to be funded by more borrowing.
‘We have already had 16 fiscal targets in a decade, and fiscal targets should not just be for Christmas. Mr Sunak should resist the temptation to announce another and instead recognise that more spending must require more tax.’