A raft of tax hikes, public sector pay freezes and an end to the triple lock on pensions could be deployed to mitigate the damages to the nation’s economy caused by the Covid-19 coronavirus, it has been reported.
The Treasury has deployed unprecedented financial instruments to keep the nation going during the lockdown caused by the virus – including the ongoing furlough scheme to cover the wages of millions and loans to keep businesses afloat.
Now a confidential treasury assessment cited by The Daily Telegraph is reported to say the UK’s deficit could reach heights of £337bn this year due to the government’s attempts to keep the economy afloat during the crisis.
Download the new Independent Premium app
Sharing the full story, not just the headlines
The paper added that the government document said measures including income tax hikes, a public sector pay freeze and the end of the triple lock on pensions may be required to fund the debt.
Proposing to end the triple lock, a guarantee to increase to the state pension every year based on whatever is highest out of inflation, average earnings or a minimum of 2.5 per cent, has proved controversial in the past – with many citing it as a catastrophic moment in the run up to Theresa May’s underwhelming 2017 election performance.
And a freeze to the public sector pay – potentially impacting the healthcare workers who have been on the front lines of the response to the virus – is also likely to cause consternation from the public and across the political spectrum.
The document, drawn up for Rishi Sunak, the chancellor, reportedly said that to fill such a gap in the public finances through tax revenue rises would be “very challenging without breaking the tax lock”.
“To raise fiscally significant amounts, we would either have to increase rates/thresholds in one of the broad-based taxes (IT, NICS, VAT, CT) or reform one of the biggest tax reliefs (eg pensions tax),” the document is said to note.
While the measures during the crisis have maintained cross-party support, some backbench conservatives have expressed concern at the scale of the measures employed – while urging the chancellor to return to reducing the deficit, a staple of the Conservative party since it entered power in 2010.
The Treasury declined to comment on the report.
Additional reporting by PA.
