Chancellor urged to consider corporation tax rise and public sector pay freeze

A Tory called for the freeze while Labour warned that the economic recovery was at stake.

Chancellor urged to consider corporation tax rise and public sector pay freeze

Chancellor Rishi Sunak should consider a “moderate rise” in corporation tax in the upcoming Budget, according to a Conservative former Treasury minister.

Simon Clarke warned it would be “nothing short of immoral to mortgage our children and grandchildren’s futures to chance” as he urged for some fiscal consolidation measures to be announced on March 3.

Government stimulus projects will help areas across the UK but difficult decisions lie ahead to deal with the country’s “gravely damaged” public finances, Mr Clarke added.

Budget 2020
Chancellor Rishi Sunak with Simon Clarke MP (left) during a visit to the Nexus Building at the University of Leeds (Danny Lawson/PA)

Their remarks came as Labour warned the Government’s approach is “crashing” the economy during the Covid-19 pandemic.

Speaking during an Opposition Day Debate in the Commons, Mr Clarke told MPs: “Not all the decisions that lie ahead will be easy, there’s no point in sugaring the pill.

“Our public finances are gravely damaged and some of this damage will be repaired when the free market is allowed to operate normally again.

“However, we need to be realistic.

“Nothing that we said during the course of the 2010s about the danger of running unsustainable levels of public debt has changed.

“The fact that borrowing costs are historically low is to be welcomed but we should regard that as a stroke of great good fortune that it coincides with our hour of need, rather than as an ongoing inevitability.

“I challenge anyone in the chamber to tell me with certainty what the world will look like in the 2030s or 2040s and what borrowing costs will be.

“I believe it will be nothing short of immoral to mortgage our children and grandchildren’s futures to chance.

“For debt to exceed 100% of GDP for the first time since 1963 is simply not sustainable.

“So I would support and indeed urge some measures of fiscal consolidation in the Budget next week.

“These should be targeted and both hard-pressed families and key drivers of employer behaviour like National Insurance should be protected, but I can well see the sense in looking at other options to raise revenue in the medium term – including corporation tax.

“Companies are realistic about the economic landscape.

“They care more about policy certainty and general prosperity of the economy than about a moderate rise in corporation tax.

“So I hope the Chancellor will be prudent as well as bold and emphasise the need for discipline and sound money next week as part of our recovery.”

Spending Review
Shadow chancellor Anneliese Dodds (Yui Mok/PA)

But Mr Mayhew said: “We need to recognise that as a result of the pandemic private sector wages have fallen by almost 1% when at the same time last year public sector wages already rose by almost 4%, and unlike the private sector, who have lost jobs, who have been furloughed, who have had insecure employment and reduced working hours, the public sector has been very largely protected.

“In these circumstances is it fair to tax the private sector even more to pay for further public sector increases?

“It might be popular but it would not be fair or in the long-term interests of the country.

“So let’s get the economy growing with private sector pay increasing so we can afford to pay the public sector more as well.”

Opening the debate, Labour’s Anneliese Dodds said: “When the Chancellor stands up to deliver his Budget he faces a choice.

“He could take us back to the short-termist irresponsible policies that left our economy and our country so dangerously exposed before the crisis, or he could learn from the mistakes made over the last 10 years and move forward to a stronger more prosperous future.

“Our economic recovery is at stake and the Chancellor cannot afford to get it wrong, he cannot continue to duck the big decisions nor to go missing when he is most needed and must make the responsible choices that have been so frequently lacking over this last year.”

Treasury minister Steve Barclay claimed there had been a “decade of economic success” ahead of the pandemic and insisted jobs will “remain at the heart” of Mr Sunak’s economic plan.

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