Rishi Sunak is to resist a massive tax claw back of the £400billion he’s spent on Covid in Wednesday’s Budget despite UK debt hitting £2.1trillion.
In an exclusive interview shadow Chancellor Anneliese Dodds tells him: “Now is not the time.”
Instead the Chancellor will give 700,000 shops, pubs, clubs, hotels, restaurants, gyms and hair salons up to £18,000 each to kickstart businesses after the Covid shutdown.
Mr Sunak said of his £5billion Restart Grant scheme: “The extra cash will ensure our high street can open their doors with optimism.”
Another £425million will go to local authorities to help businesses not covered by the scheme.
The Chancellor will also boost the housing market with 95 per cent mortgages from April and a further three month Stamp Duty holiday.
It means cash-strapped buyers will only need five per cent deposits on homes up to £600,000 with the Treasury guaranteeing the rest.
Only eight low deposit mortgages are now on offer nationwide because of Covid. The move marks a return of the Help to Buy scheme scrapped in 2017.
PM Boris Johnson said: “I want generation rent to become generation buy. Young people shouldn’t feel excluded from the chance of owning their own home.”
Quick buyers will also benefit from Stamp Duty savings of up to £15,000 on purchase prices up to £500,000.
Mr Sunak said: “Saving up for a big deposit can be difficult. The pandemic has meant there are fewer low deposit mortgages available.”
He will also announce a new Northern-based Infrastructure bank to unlock £40billion of investment in big construction projects. Mr Sunak said: “This shows how serious we are about levelling up the country.”
The Chancellor may now wait until Tax Day on March 23rd, when a raft of long-term money-raising measures will be unveiled, to signal a consultation on a £260billion wealth tax for millionaire couples.
However, threats by Tory MPs to rebel against any tax increases may force him to postpone until the financial statement in November.
The one-off move would see more than eight million better off paying one per cent of their wealth above £500,000 based on the value of pension pots, savings and their homes – less mortgage costs.
But Melissa Geiger of accountants KPMG warned: “Many of those caught are potentially asset rich but cash poor.”
Iain Tait of investment firm London & Capital said: “A wealth tax looms on the horizon. But we are likely to see more given away than taken away.”
Anneliese Dodds today calls on Rishi Sunak to end his “triple hammer blow” hits to families.
The shadow Chancellor says in Wednesday’s Budget he must
- SCRAP five per cent council tax increases.
- HALT the public sector pay freeze.
- KEEP the £20 weekly uplift in Universal Credit.
She said: :”He must protect family finances to give people confidence to spend.
“And the Chancellor needs to do more to create new jobs for the future.”
And Ms if Dodds was Chancellor she would extend Covid wage support for at least six months, double the time the Chancellor is planning.
She added: “The PM says he wants to be driven by data not dates. Yet arbitrary dates are being put in place.
“Right now in the middle of a pandemic it’s not sensible to raise taxes or to cut spending.
“We need a progressive tax system for the future but now is not the time to do it.
“It’s important now to focus on jobs and growth. If he raises taxes now it will only be to cut them again before the next election.”
She said short term incentives to boost the economy such as Mr Sunak’s Eat Out to Help Out £10 meal subsidies should not be repeated.
Ms Dodds said: “More sustainable growth means tackling the public health crisis.
“People must feel safe going into pubs and restaurants.”
An alternative under consideration is a property tax to roll stamp duty and council tax into one. That would see an annual 0.48 per cent charge so a £200,000 home owner would pay £960.
Brexit means the UK is no longer tied to EU VAT rules enabling the Chancellor to reduce it on the cost of removing dangerous Grenfell-style cladding from homes.
And he can cut it to five per cent for solar panels and other green energy devices, a rate now only enjoyed by over 60s.
Five per cent VAT for hotels, B&Bs and amusement parks due to end this month could be extended to June along with their business rates holiday.
The furlough scheme paying six million workers 80 per cent of wages which has kept the unemployment rate unchanged since December at 5.1 per cent will also continue for at least three months.
Removing it would see at least a million more out of a job joining the 2.5 million who already are.
Unite boss Len McCluskey said: “It’s vital struggling families on the lowest incomes will not be abandoned in their hour of need.”
And George Bull of RSM tax consultants said: “The UK may face the harshest of times if support is removed too quickly.”
The Chancellor is stuck with the 2019 Tory manifesto pledges not to increase income tax, national insurance or VAT.
But he could bring the nine per cent NI self-employed rate more in line with the 12 per cent paid by employees without breaking promises.
To compensate the Covid Self Employed Income Support Scheme would be extended.
And HMRC’s £6 a week working from home allowance is likely to be made easier to claim. The £12,500 tax free personal allowance may be frozen along with the £50,000 higher rate threshold to save £6billion.
Business is braced for a hike in 19 per cent Corporation Tax with each extra point bringing in £3billion. Even at 25 per cent it would be three points below the EU average.
From April the minimum wage will go up from £8.72 an hour to £8.91.
And the lifetime pension pot allowance, the amount people can save before being taxed, could be frozen at £1million.
Mr Sunak is relying on a post-lockdown spending spree for some extra tax revenue.
Julian Jessop of the Institute of Economic Affairs said: “Once the brakes are taken off, the economy is likely to bounce back quickly.”
Booze is tipped to be frozen though Boris Johnson says he likes the Social Market Foundation think tank proposal to raise the price of a supermarket can of beer by 14p to lop 36p off a pub pint.
Bosses will not have to pay national insurance for the first year they hire armed forces veterans to encourage them to employ more.
Capital Gains Tax at 28 per cent could be brought in line with income tax rates with highest earners paying 45 per cent – but not until 2022.
And the Chancellor could signal that share dividend payments taxed at 7.5 per cent for basic rate payers and 32.5 per cent at higher rate will be equalised with income tax.
The low paid below £12,500 a year are likely to get tax relief on auto-enrollment pension contributions adding 25 per cent to what they put in. That brings them in line with those on ‘relief at source’ schemes.
The income threshold of £50,000 for taxing child benefit has remained unchanged since it was introduced in 2013.
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That means a household with combined income of just below £100,000 qualifies for child benefit with no tax while a family with only one worker earning more than £50k incurs a charge.
With Covid leaving so many families with one partner jobless that could change.
Child benefit will go up on April 12 to £21.15 a week for one child and £14 per week for additional children.
Remote Gaming Duty for online gamblers may rise above its current 21 per cent.
Budget at a glance
- £18,000 for pubs, gyms and hairdressers
- Return of 95 per cent Help to Buy mortgages
- Cigarettes up 26p a pack
- Cigars up 13p a pack
- Beer, wine and spirits frozen
- No fuel duty increase for 11th year running
- Furlough extended three months
- £20 UC uplift extended for six months
- Minimum wage up £8.72 to £8.91
- Long term wealth or property tax