Rishi Sunak last night hinted that future taxes will have to rise to pay for the unprecedented economic bailouts for business, workers and the self-employed.
Unveiling a huge rescue package for Britain’s army of self-employed workers, the Chancellor said he had set aside economic orthodoxy to deal with the national emergency, but warned that would come at a cost as the public finances are plunged deep into the red.
The latest scheme – which will allow almost 4 million people to claim back 80 per cent of lost profits – follows huge bailouts last week for business and those in employment.
Speaking at a press conference in No10, Mr Sunak issued a direct warning that the price of the package would include the future loss of their tax and national insurance perks, saying: ‘If you all want to benefit equally from state support you must all pay in equally in the future.’
Chancellor Rishi Sunak holding a digital press conference about the coronavirus outbreak
With the overall cost of economic support now running to hundreds of millions of pounds, and tax revenues collapsing, the Chancellor also hinted at wider tax hikes in future, saying that everybody would be ‘chipping in’.
The Treasury said that tax changes would be set at future Budgets. But a Government source said it was right to ‘level with people’ that the extraordinary bailout packages would eventually have to be paid for.
Last week the Government announced a £350billion package of support for business, and pledged to pay 80 per cent of the wages of employees whose jobs would otherwise disappear because of the crisis.
And in yesterday’s announcement Mr Sunak said the self-employed would ultimately benefit from ‘tens of billions of pounds’ in state help.
Grants will be worth 80 per cent of a person’s average monthly profit over the last three years, up to a maximum of £2,500.
To claim the cash, people will simply have to show that their profits fell as a result of the epidemic.
The scheme is expected to cost £3billion a month for three months but could be extended if the epidemic continues.
Some 3.8 million self-employed people will be eligible to claim, with payments expected to average £940 a month each.
Payments will not be available until June, leading to questions about how people will survive financially until then.
Chancellor Rishi Sunak outside 10 Downing Street, London, joining in with a national applause for the NHS to show appreciation for all NHS workers who are helping to fight the Coronavirus
People will be contacted directly by HMRC about their eligibility and will receive three months’ money backdated.
The scheme will not be available to those whose profits average more than £50,000 a year, who account for roughly five per cent of the total.
They will also not be available to 1.7 million people who are registered as self-employed but get most of their income from a regular job.
New businesses that did not file a tax return in 2018/9 will not be eligible, with the Treasury saying it would be impossible to fairly estimate their income.
During his six weeks as Chancellor, the sight of Rishi Sunak standing at the Downing Street lectern giving away billions has become so familiar you would expect less cash if a magic money tree appeared in his place.
But Sunak was not just Mr Moneybags yesterday: He made it crystal clear that he wants it all back.
In doing so he passed the first test of any politician who wants to be taken seriously – he showed he had the ability and courage to announce bad news as well as good. He told the self-employed that in return for the help he gave them, they will no longer be able to pay less tax than others.
If we all want to benefit, he said in explicit terms, we must all pay in equally. But the self-employed won’t be the only ones who pay more.
Britain’s Chancellor of the Exchequer Rishi Sunak has put in place an unprecedented package of emergency income aid for those affected by the coronavirus outbreak
Everyone will have to ‘chip in to right the ship’, said Sunak. An apt metaphor from a man who grew up in the port of Southampton.
It could mean tax rises for all of us, public spending cuts, maybe both. Sunak didn’t say when or how.
It won’t be before Covid-19 is defeated but he wanted everyone to know: His day of reckoning will come.
Sunak, a former banker, will be aware of the growing number of experts warning of the danger that the cost of the coronavirus cure may be worse than disease itself.
That the scale of the damage to Britain’s and the wider global economy could be such that it causes huge hits not just to jobs and public finances but to our economic health too, claiming more lives than Covid-19.
Nor is it just Donald Trump who is making this argument.
Whisper it softly, but it is a view shared by some ministers – though not surprisingly, none has been bold enough to utter it in public so far.
The moment he delivered his Budget less than a month after taking office with such precocious confidence, I thought Sunak had the makings of a future prime minister.
It clearly wasn’t a fluke. His two successive performances have been every bit as assured.
For all his qualities, Boris Johnson’s critics say one of the reasons he has at times appeared uncertain responding to coronavirus is because his cheery temperament is not suited to breaking bad news.
Sunak showed no such hesitation yesterday.
Instead of leaving it to aides to do his dirty work with anonymous briefings of future tax rises, like so many cowardly ministers, Sunak could not have been more up front.
He announced it from No10 with half the nation watching live on TV It could not have been more plain if he had held up a placard stating: Taxpayers, you have been warned.
Margaret Thatcher learned the same timeless Conservative principles from her shopkeeper dad.
They were values that enabled her to prevent the UK going bust after Labour’s overspending – and served her well in 11 years in No10 Downing Street.
The same values will help Sunak in No11 as he battles to prevent the UK going bust as a result of the unavoidably huge amount he is spending on combating coronavirus.