ne thing on which most economists are agreed is that now is not the time to be raising taxes. After the shock caused by the response to the coronavirus pandemic, people need to be encouraged to spend; money needs to be pumped into the economy, not taken out of it. So why are the news headlines full of speculation about new taxes?
Part of the explanation is that the Treasury is doing its job. It always has to be working on possible new sources of tax revenue, and especially in the run-up to a Budget, so that it can give the chancellor a range of options. Rishi Sunak presented a series of fiscal statements in the early stages of the coronavirus crisis that were far bigger than most budgets, but now he is preparing for the actual Budget, in November or early December, in which he wants to set out a credible path for a return to sustainable government finances.
In the medium term, that will mean higher taxes. So even if he doesn’t intend to raise taxes in this Budget, he may want to prepare the ground for doing so later. However, any work done in the Treasury – and especially any options that are shared with No 10 – is likely to find its way into the public domain. Sometimes, this is deliberate briefing in order to try to kill a particular idea, or to discredit the person who advocated it. More usually, it is seepage: gossip and showing off by people in the know that finds its way to journalists.
