Coronavirus has brought large parts of the economy to a standstill, and the government has had to spend billions to support workers, businesses and the NHS. On July 9, Chancellor of the Exchequer Rishi Sunak delivered an economic update on the next stage of the Government’s plans to rebuild the economy. He announced a package worth up to £30billion, which included plans to protect jobs, help younger workers and encourage spending.
It is not clear how big the final bill will be until after the crisis is over. However, Downing Street will certainly have to borrow unprecedented amounts of money.
According to the Office for Budget Responsibility (OBR), for the current financial year (April 2020 to April 2021), it could be anywhere from £263billionn to £391billionn.
Before the crisis, the government was expecting to borrow about £55billionn for the whole financial year, but it borrowed £128billionn in the first three months alone.
According to The Telegraph, Treasury officials are pushing for the largest tax rises in a generation to plug the gaping holes in the public finances, in a move being resisted by Downing Street.
The proposed quintuple whammy of tax increases would enable the Exchequer to raise at least £20 billion a year, and some could be introduced as early as in the Budget.
While no decision has been made, multiple sources have told the publication that proposals under active consideration include aligning capital gains tax (CGT) with income tax, slashing pension tax relief, raising fuel and other duties, the introduction of an online sales tax and a simplification of the inheritance tax system.
Moreover, according to unearthed reports, Prime Minister Boris Johnson might consider raising council tax for the super rich.
In March, Mr Johnson shelved plans to impose a “mansion tax” on owners of expensive homes, following a major backlash among Conservative MPs and grassroots.
The Prime Minister is understood to have “cooled” on the idea of including a new “high value property tax”, having previously discussed the proposals with Sajid Javid while he was still Chancellor.
The Sunday Telegraph disclosed the Treasury also wanted to announce a nationwide revaluation of homes, which would have left millions of families with higher council tax bills.
However, neither policy featured in the budget delivered by Rishi Sunak, Mr Javid’s successor.
Mr Johnson reportedly backed away from the proposal for a “recurring” wealth tax, after the plan sparked fury among senior Tories.
It was not the first time the Prime Minister had considered the idea, though.
According to a throwback report by The Telegraph, in 2014, the former Mayor of London said he was open to proposals for new council bands to ensure the richest property owners paid more tax.
He singled out “Russian oligarchs” and hit out at the low levels of council tax they paid for their “stuccoed schloss” in upmarket parts of London.
New council tax bands had previously been suggested by the Liberal Democrats, but Conservatives repeatedly rejected the calls.
Mr Johnson said he was “by no means an advocate” for Lib Dem proposals for a mansion tax on Britain’s most expensive properties.
However, his comments appeared to represent a U-turn for the former Mayor, who had repeatedly rejected calls from other parties to increase taxes for the rich.
Speaking to MPs on the Communities and Local Government Committee on the subject of devolving more powers to London, Mr Johnson said: “If you compare what a Russian oligarch is paying on his stuccoed schloss in Kensington in annual council tax compared to what such a gentleman might be asked to pay in Paris or New York or anywhere else it is quite stunning.
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“No one has yet grasped that.
“I’m by no means an advocate of a mansion tax. In fact, I vehemently oppose such an idea but we cannot go on forever without looking at our council tax valuations.”
Mr Johnson said for many homeowners, council tax payments could have gone down if new bands were introduced.
Asked if he would support new council tax bands, Mr Johnson said: “I think that’s the kind of thing you need to look at.
“There’s a reason this hasn’t been done. It’s because it’s very difficult and very unpopular. But that doesn’t mean that it’s not the right thing to do.”
Earlier that year, Mr Johnson had rejected plans by Ed Miliband and Ed Balls to restore the 50p rate of tax, accusing them of trying to “bash the rich”.
He said: “They cannot bring themselves to accept that these business people are moved by the forgivable desire to make money — and that if you allow them to keep a slightly bigger proportion of their earnings, the evidence is actually that they will go out and make more.”
In 2012, he also rejected any plans for a mansion tax proposed by former Lib Dem leader Nick Clegg, as well as “the idea of a mansion tax by the back door”.
He said at the time: “The idea of a mansion tax is crazy. The idea of a mansion tax by the back door through vastly inflated council tax bills is nonsense.
“These taxes will disproportionately hit London and Londoners, penalising people simply because of circumstance, trapping people who in many cases are cash poor.”