Last month, Rishi Sunak announced a £330billion bailout for businesses in a move to drastic “wartime” measures to fight the coronavirus outbreak. He also scrapped business rates for a year and promised cash grants for shops, pubs and other high-street outlets hit by the slump in customers. The Chancellor has also made a number of other spending pledges totalling hundreds of billions of pounds, including attempted protection for the self-employed and households struggling to pay bills.
But companies are being forced to temporarily close and some forced out of business altogether – triggering a huge collapse with millions of jobs already lost.
There are increasing fears the nation could plunge into a massive recession – deeper than the 2009 financial crisis and one of the most severe since 1900.
Forecasts are warning economic contraction could soar beyond six percent this year, compared to 4.2 percent during the financial crisis in 2009, and a deeper contraction than during the Great Depression more than a century ago.
The British public, whilst grateful for the hundreds of billions being spent to desperately attempt tom prop-up the economy and save millions of jobs, have been left wondering how this will be paid back, and tax rises is the first inevitable worry.
The UK is heading towards a huge recession as the cost of keeping the country afloat becomes evident
Rishi Sunak has been warned raising taxes would be ‘disastrous’ for UK households
The absolute last thing the country will need during or after this crisis is higher taxes. It would be totally disastrous to put already strained household budgets under further strain
Sam Packer, media campaign manager at the TaxPayers’ Alliance, warned: “The absolute last thing the country will need during or after this crisis is higher taxes.
“Taxpayers are already facing the highest tax burden in fifty years.
“It would be totally disastrous to put already strained household budgets under further strain.”
He added: “To boost the economy, we would be far better off freezing council tax and lowering personal tax rates to make sure people have more of their own money to spend.”
The Chancellor has made several huge spending commitments
Julian Jessop, economics fellow at the Institute of Economic Affairs think tank, warned massive tax hikes would be a “terrible idea” because it would stall any attempted recovery.
He said the UK has already technically sunk into a recession, warning the economy possibly will shrink by as much as 25 percent during the current quarter.
Mr Jessop told Express.co.uk: “A massive hike in taxes would be a terrible idea, not least because it would stall the recovery.
“It makes more sense to spread the costs by borrowing more for longer, especially given the very low level of interest rates.
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“This means that taxes may have be a little higher than otherwise for a longer period, perhaps ten years or more, but there is no need for a large increase any time soon.
He added: “There is already a huge hit to economic activity, which could shrink by as much as a quarter in the coming months.
“In the UK, a recession is more commonly defined as two successive quarters of falling GDP. That seems almost certain.”
Patrick Sullivan, chief executive of the Parliament Street think tank, warned the Government will likely be forced to hike taxes – even if the economy does manage to stage a quick recovery.
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He added fiscal rules enforced by former Chancellor Philip Hammond “have been well and truly thrown out of the window” with the current huge spending pledges.
Dr Steve McCabe associate professor at the Institute of Design and Economic Acceleration and senior fellow, Centre for Brexit Studies at Birmingham City University, warned: “The challenge for the treasury is avoiding a short-term recession becoming embedded into the medium and long-term.
“This produces a depression with all of the attendant social and economic consequences that were experienced during the Great American Depression in the 1930s.
“This led to an upheaval and a clamour for simplistic solutions that, destructively for the world, created a rise in fascism and the Nazis in Germany.”
Published at Sat, 11 Apr 2020 06:00:00 +0000