UK ‘facing tax bombshell of around £40 billion a year’ following Rishi Sunak’s spending plans announcement - IFS

Britain faces a tax bombshell of about £40 billion a year, leading economists warned today.

The Institute for Fiscal Studies believes that Rishi Sunak has underestimated how much he will need to spend in future years.

It believes the Chancellor’s plans unveiled yesterday could mean about £20 billion of tax rises by the middle of the decade.

The IFS is stressing that his calculations assume more than £10 billion less public spending a year than announced in the March Budget, and that he may have to allocate additional money beyond 2021-22 for the NHS to deal with Covid and other costs such as for social care, education and possibly extending the £20 a week boost to Universal Credit.

IFS director Paul Johnson told the Standard: “It looks like he is going to need to spend perhaps another £20 billion more than he is claiming. In total we could be talking about £40 billion of tax increases a year by the middle of this decade.” He believes Mr Sunak may be basing his blueprint on “excess optimism”. He also warned that:

Millions of people face council tax hikes of five per cent as the Chancellor’s plans are predicated, he believes, on such rises. Mr Johnson stressed: “Across the country the average (rise) is about £70 a household, bigger in London.”

The freeze on pay for about 1.3 million public sector workers would hit the capital particularly hard, partly given the number of civil servants who work in the city. Mr Johnson said: “It’s graduate public sector workers in London and the South East who are least well-paid relative to the private sector who will be particularly affected.”

Further spending cuts could be imposed on Whitehall departments outside those being protected which include health, education and defence. Mr Johnson said: “He is pencilling in no real increases and possibly some more austerity.”

Mr Sunak defended his review, telling the BBC: “I just used the language that I thought is honest with the British people about the situation that we are in and the outlook that we face.”

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