Budget 2021: Ben Shephard challenges Rishi Sunak on GMB
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Paul Johnson, director of the IFS, offered a scathing review of Mr Sunak’s second budget. He said while a further £65billion in Covid support was announced, it was a “tale of two budgets” with fiscal tightening of over £30billion unveiled relative to previous plans. Mr Johnson said when the recent cuts to public spending announced last autumn were taken into account, the Chancellor announced fiscal tightening of almost £50billion relative to his pre-pandemic plans of March 2020.
He argued that two big tax increases announced in the budget were “both screeching U-turns on Conservative policy over the last decade.
And on corporation tax, set to jump from 19 percent to 23 percent in 2023, he said it would be a rise of “historic proportions”.
Mr Johnson said: “Santa Sunak, purveyor of billions today looks more like Scrooge Sunak.”
He added: “How he is actually going to fix the public finances remains to be seen.”
The IFS said Mr Sunak’s spending plans to help address the UK’s battered public finances following the coronavirus crisis “do not look deliverable, at least not without considerable pain”.
The body also hit out at the Chancellor’s noticeable lack of announcements to tackle the long-term consequences of the pandemic.
Mr Johnson said this was a “hole that needs to be filled and soon”.
The IFS has said the structure of the tax system is changing significantly under Mr Sunak’s plans.
In his announcement on Wednesday, Mr Sunak said the income tax personal allowance – the threshold above which people are required to pay income tax – will be frozen at £12,570 from 2022.
The freeze will continue until 2026.
On Thursday morning Mr Sunak defended the tax changes, saying they represented “a fair way to help solve the problems that we need to”.
By 2025 one in six people will be higher rate taxpayers following the freeze on thresholds.
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The figure compares to one in 15 in 1990.
The IFS also said Mr Sunak had failed to level with people about £4 billion a year worth of spending cuts in his Budget.
Mr Johnson, the IFS chief said: “The Chancellor isn’t really levelling with people about the choices the Government is making to repair the public finances.”
He added: “There’s going to be something that looks a bit like austerity for some public services.”
Councils, the Ministry of Justice and the Home Office are set to feel the pinch.
On Thursday Sterling held above $1.39 against the dollar as investors continue to expect the UK’s speedy vaccination programme to help with economic recovery.
Neil Jones, head of FX sales at Mizuho Bank, said Sterling is finding support from the budget and progress on vaccinations, which “add weight to the view the UK will stand at the forefront of the global Covid recovery”.
He added: “My sense is the budget measures bode well in the eyes of overseas investors”.
Sterling edged 0.1 percent lower against the dollar to $1.3937 at 11.05am UK time.
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