Rishi Sunak has been warned to use his Budget to support people to recover from the Covid-19 pandemic, not to try to ‘fix’ public finances.
The Institute for Fiscal Studies said the financial speech next month should be used to announce “well-targeted extensions in emergency support to households and employers.”
The group warned it was vital to ensure that the furlough scheme and other Government support is unwound gently, rather than coming to an abrupt halt.
And they called on the Chancellor to keep the £20-a-week uplift in Universal Credit.
In a report published today the IFS admits tax rises will be needed “at some point” to reset the economy after the pandemic, it warns “substantial rises” should not be part of next month’s speech.
Director Paul Johnson said: “For now, Mr Sunak needs to focus on support and recovery.
“A reckoning in the form of big future tax rises is highly likely, but not as yet inevitable.”
A move to keep the £20 rise in Universal Credit in place would cost around £6.5 billion in the long term.
But removing it could see some single, childless adults see their income fall by a fifth, the IFS said.
“Any significant continuation of the furlough scheme must be limited and carefully targeted,” Mr Johnson added.
“In the recovery phase (Mr Sunak) needs to support jobs and investment, but also crucially needs to recognise and address the multiple inequalities exacerbated by the crisis.
“Fiscal policy should lean against the effects of looser monetary policy which has again benefited the older and wealthier at the expense of the younger and poorer.”