UK is 'closed for business if tax rates rise' says expert
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Rishi Sunak is set to unveil the Spring Budget for 2021 on March 3 as the UK continues to slowly make its way out of the coronavirus pandemic. The Chancellor is believed to be considering tax rises for most businesses across the UK in a bid to start paying back the large sums borrowed to sustain the economy through the crisis. But Matt Kilcoyne from the Adam Smith Institute warned hikes in the next budget would “signal to not invest” in the country to foreign investors.
Speaking to talkRADIO, Mr Kilcoyne said: “We obviously thought that when the pandemic was happening, the Chancellor was absolutely right to get out the national credit card in order to reduce the amount of economic activity and therefore reduce the number of human interactions to stop the spread of the virus.
“However, going into the budget period saying, whilst restrictions are still in place, whilst the economy is still shut, businesses are still not able to raise revenue, that the businesses are going to have to pay a higher tax is just a signal just to not invest in the UK.
“It is a symbol to say the UK is closed for business at a time it should be looking at ways to reopen the economy.”
The UK has borrowed nearly £400 billion to support the economy through the series of lockdowns and limited business the coronavirus pandemic forced on Britons.
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More than £280billion has been pumped into the economy so far, including cash to protect jobs and businesses as well as extra funding for public services.
Asked about alternatives Mr Sunak could consider to tax rises, Mr Kilcoyne suggested the UK could draw upon its record to set up a long-term repayment schedule.
He continued: “There are different ways like everyone pays different bills. If you buy a frock in a shop, you have to pay upfront in cash.
“If you’re buying on credit terms, you can spread it out over a few months and if you’re buying a house, you’d be on a 25-years mortgage.
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Rishi Sunak discusses the Spring Budget
“The Government has the same thing – some things are paid upfront, some things are paid off over long periods of time.”
He added: “The UK has a long history of paying off debts, paying its way and it’s rewarded in the international monetary market by having lower guild yield and also longer duration of debt which allows the Government to make these kinds of large-scale borrowing in once-a-generation scenarios.”
Discussing the focus of the Spring Budget, the Chancellor reiterated his commitment to protecting jobs.
He also insisted the Treasury will work on rebuilding British finances to more stable levels to ensure the country is best prepared for potential crises in the future.
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Mr Sunak said: “As we’ve been discussing, my priority throughout this crisis has always been to try and protect as many people’s jobs as possible through this very difficult period.
“That will remain my overriding economic priority. Public finances are important and we’ve only been able to provide the support that we have because of a strong economy and strong public finances coming into this.
“I want to make sure whenever the next shock hits the country, that we can also respond in the same way.
“That will require our public finances to be put back into a strong and sustainable position, and I’ve said I would always be honest and upfront with people about what exactly that means.”
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