Rishi Sunak, the UK’s chancellor, on Thursday refused to rule out raising income tax, value added tax or national insurance, as new forecasts revealed a borrowing hole of about £30bn at the next election.
The “triple lock” against the rates of these taxes increasing was a central part of Boris Johnson’s manifesto at the December 2019 general election, and Mr Sunak was asked if that pledge still stood.
Speaking on the BBC, he said the current level of spending was “unsustainable”. Asked if the tax lock still applied, he added: “I’m not going to be drawn on future fiscal policy.” On Sunday Mr Sunak gave the same answer to Sky’s Sophy Ridge.
Mr Sunak on Wednesday dropped a Tory manifesto pledge on overseas aid spending, and Conservative MPs speculated that he might be about to reverse the flagship promise on taxes because of the Covid-19 crisis.
But the Treasury insisted later on Thursday that the election pledge still applied. “The chancellor, as any chancellor, rightly does not speculate on future tax policy,” a Treasury spokesman said. “But we remain committed to the manifesto pledge.”
Mr Sunak infuriated some senior Tories when he confirmed in his spending review that an election pledge to maintain overseas aid spending at 0.7 per cent of national income would be abandoned, saving £4bn next year.
The revelation that government borrowing this year will hit almost £400bn has raised questions about how Mr Sunak will start to deliver what he claims is the Conservatives’ “sacred duty to future generations” to balance the books.
Mel Stride, Conservative chair of the House of Commons Treasury select committee, said it was inevitable the chancellor would look at the three taxes covered by the manifesto lock because they made up about two-thirds of tax revenue.
Mr Sunak claims he will not balance the books by returning to public spending austerity, but his spending review included a pay freeze for most public sector workers and other cuts that suggested tax rises alone will not be enough.
On Thursday Dominic Raab, foreign secretary, will face an angry response from some Tory MPs when he appears in the Commons to defend the “temporary” cut to the overseas aid budget.
However, Mr Sunak insisted that the cut was necessary to allow the government to fund the “priorities” of the British people, including health, education, infrastructure and defence. Early polling suggested the cut to aid spending was popular with voters.
The chancellor was asked to defend his priorities at the spending review, including a “pay pause” for a teaching assistant that coincided with a £4bn a year boost to defence spending.
He said it was “fair” for public sector workers to share the Covid-19 pain felt by workers in the private sector, adding that defence spending would create jobs, including in Scotland.
On Brexit, Mr Sunak insisted that Britain should not strike a deal “at any cost”, in spite of warnings from the independent Office for Budget Responsibility that a “no trade deal” outcome on January 1 could cut 2 per cent from the British economy next year.
“I remain hopeful and confident we can find a path to a deal,” he told the BBC’s Today programme. “If people retain a constructive attitude and approach these talks in a spirit of goodwill, I think we can get there.”