Coronavirus tax rises may be delayed

He also suggested that the Treasury could go after the “most hated groups” of “foreigners, corporations and rich people” to raise some of the forecasted £40 billion a year needed to balance the books in the short term. His comments come as the Office for National Statistics (ONS) published official figures yesterday showing that GDP had risen by a record 15.5 per cent in the last quarter, bringing the country out of recession.

However it comes amid predictions that the economy will have slowed down again in the final quarter of the year due to the second wave of the virus taking hold, forcing many regional lockdowns across the UK.

Mr Hammond, who was UK chancellor under Theresa May, said the lion’s share of the debt repayment burden would be pushed on until after the next election, explaining it would likely be “supplemented by some token increases on what I call the hated groups: corporations, foreigners, and rich people”.

He said:  “A windfall tax is almost inevitable. If anybody has done well out of this crises they can expect to be taxed on their gains.”

The former chancellor said it was “absolutely right” that the Treasury “has supported the economy through the crisis with a huge increase in fiscal spending”, adding that it was essential now to “rebuild that shock-absorbing fiscal capacity in the economy for the next time”.

He continued: “The question is when, by how much, and how, we consolidate once we’re through the crisis.” On tax rises, he said that anyone who thought the Government would introduce a policy to reduce the deficit and debt accumulation before the next election was “living in fairyland”.

He explained: “We also need to look at the politics of this, frankly... anybody who thinks that [consolidation would begin in 2023] is living in fairyland.”

He added: “In the real world. I see very little appetite for dealing with half -truths.

“There’s going to be a General Election in 2024 almost certainly, so I’m pretty confident that borrowing will take the lion’s share of the burden until after the next General Election supplemented by some token increases on what I call the hated groups – corporations foreigners and rich people, and of course some taxes on windfall.”

The former chancellor said that for the “last decade or so” tax rises have been focused on charging more to “others”, explaining “foreigners, the rich, and corporations... best of all, rich foreign corporations”.

He said such a strategy was a “politically magic combination”, but added: “Sadly, there aren’t as many of them as we would like.

“And in the end I’m left wondering whether this is an elaborate attempt to convince ordinary taxpayers that we can fight a war, or battle a pandemic and deal with both the cost of the war itself, and the medium-term, structural damage to the economy without them having to contribute at all... I’m afraid I feel it is a deception.”

His comments come in response to a report by the Resolution Foundation, which suggested firms which have had their finances boosted by the crisis should be hit with a “pandemic profit levy”.

The think-tank argues supermarkets, as well as private services contractors, should have to pay a windfall tax. It also recommends a new health and social care tax as part of a £40bn recovery plan to meet wider challenges facing the UK over the next decade. In its “unhealthy finances” report experts say tax rises rather than public service cuts should drive the recovery after a decade of austerity.

They recommend the recovery should start later and proceed more carefully than in the past, with interest rates near zero, but that it should go further than in past recessions. The pandemic profit levy of 10% on above-normal profits in 2020 would raise £130 million and ensure fairness is at the heart of the recovery scheme, the think-tank said. It argues much of the profits made by these firms reflects the luck of not being adversely affected by social distancing, while some have profited from Government contracts such as test and trace. Resolution Foundation research director James Smith said the “daunting task” of repairing public finances will likely require £40bn of tax hikes.

He added: “As well as repairing the public finances, the Chancellor’s consolidation plan should help the country address many of the non-Covid challenges Britain faces – from tackling insecure work to properly funding our social care system, whose weaknesses have been tragically exposed during this crisis.

“To do this, the Chancellor should combine tried and tested revenue raisers with major reform of wealth taxation and a new health and social care levy. This would ensure that postCovid tax rises reflect the very uneven nature of this crisis, but also play a part in building a better country after it.”

A Treasury spokesman declined to speculate on the contents of future budgets. He added: “Our immediate priority remains clear: to protect lives and livelihoods across the country.

“We’ve provided over £200bn of support for people, businesses and public services. As the Chancellor has already set out, over time and as the economy recovers the Government will take the necessary steps to ensure the long-term health of the public finances.”

Yesterday the Treasury announced a 12-month extension to a plan to encourage investment in British manufacturing. The temporary £1 million cap on tax relief on capital investments in plant and machinery will now be extended until January 1, 2022. The tax break was due to end on January 1, when the cap was set to revert back to £200,000.

The Treasury said the move would “boost confidence as companies look to weather the pandemic and plan for the future”.

Jesse Norman, financial secretary to the Treasury, said: “It is vital that we support business through the difficult months ahead. Extending the Annual Investment Allowance’s £1m cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefiting the wider economy too.”