Former UK chancellor: Don’t expect tax rises until 2024

Tax rises which will affect the vast majority of the population are unlikely to be in place during this Parliament, according to UK’s former chancellor of the exchequer Hammond.

Hammond, who served under Theresa May’s Conservative government for three years between 2016 and 2019, said there were two factors which made tax increases less likely. First, that raising taxes too early could harm the economy further and second, that it would be a “painful” political decision. He made the comments while speaking at Avalara Inspire Digital 2020.

“It would be probably unwise to impose significant tax increases, to start fiscal tightening before the recovery is well under way and that may well take a couple of years.

“The only way to raise significant amounts of additional revenue is with broad based taxes that affect the majority of people. That will be a very, very painful and difficult political decision and frankly, I don’t see this government making it. I don’t expect us to reach that stage this side of the next general election,” Hammond said.

Echoing Hammonds comments, The Guardian reported that prime minister Boris Johnson and chancellor Rishi Sunak “vowed” to keep taxes low in the short-term, but could not rule out higher taxes in the years ahead.

“I suspect that if you are a business or a foreigner in the UK or a wealthy individual, you have to expect some additional taxation in the short term,” said Hammond. “This will be largely demonstration effect, it’s not likely to raise large amounts of money, there just aren’t enough people in those categories to raise really serious amounts of money.

“But I would expect in the short term, relatively modest increases in taxation on people who are not numerous enough to affect the political arithmetic, and a large amount of continued borrowing to avoid tax increases or spending cuts, which will affect the great majority of people,” he added.

Reflecting on the government’s response to the coronavirus crisis, Hammond was largely supportive. However, he warned that harder times were still to come, particularly as the furlough scheme comes to an end.

“The broad principle of a big fiscal stimulus coupled with a big monetary stimulus was surely the right way to go. The challenge of course for government is that that can’t go on forever. It has to be stopped and the generosity has to be withdrawn. That in itself will be a painful moment.

“I expect that we will see unemployment starting to rise quite sharply in the UK in October as we come to the end of the furlough scheme. Businesses have to decide which of their employees they really can afford to keep on and which they’re going to let go,” Hammond added.