How will Rishi Sunak’s Budget land with Tory MPs? As reports circulate in the press that the Chancellor is considering raising corporation tax and capital gains tax as well as bringing in a stealth tax for pensioner savings, nerves are growing among Conservative politicians.
The Northern Research Group of MPs, chaired by Johnson’s old friend Jake Berry, have called on Sunak not to tax his way out of pandemic debt by raising business taxes in the budget. Tory MPs such as David Davis have warned they could refuse to vote for it if the reports are true.
So who will Sunak listen to?
Meanwhile, former prime minister David Cameron has popped up to say tax rises ‘wouldn’t make any sense at all’, comparing the Covid crisis to a wartime situation. On the other end of the spectrum, former chancellor Philip Hammond has said Sunak ought to tell the public ‘some difficult home truths’ and abandon ‘extravagant’ promises from its 2019 manifesto in order to rebalance the nation’s finances.
So who will Sunak listen to? Treasury insiders are keen to play down the idea this will be a mass giveaway Budget. While various Covid relief schemes will be extended for the duration of significant restrictions, it will also see the Chancellor acknowledge the cost so far of these schemes and what needs to be done about it.
Expect to hear Sunak talk about the budget deficit and the difficult choices as a result – along with a few measures to send a signal of his intent to find a path back to balancing the books. However, few believe Sunak will go so far as to take Hammond’s advice and tear up manifesto pledges or break tax promises.
Instead, Sunak is likely to make clear to his party and the public that he does not believe current borrowing is sustainable and that he will not rely on interest rates staying low for long, as many in his party want him to. Wednesday is shaping up to be Sunak’s most testing fiscal event yet.
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