Rishi Sunak has repeatedly refused to rule out future tax rises to pay for record public spending during the coronavirus pandemic as he warned that more jobs would be lost unless Britons embraced post-lockdown freedoms.
The chancellor said it was “too early to speculate” when asked whether the government was planning to increase taxes to pay for the unprecedented public borrowing behind the coronavirus response.
Sunak said the £30bn extra spending announced in his mini-budget on Wednesday was intended to make the economic recovery as strong as possible but that it depended on whether Britons were willing to go out and spend.
“We’ve moved through the acute phase of the crisis where large swathes of the economy were closed. We’re now fortunately able to safely reopen parts of our economy, that’s the most important thing that we can do to get things going,” he told Sky News.
“But we won’t know the exact shape of that recovery for a little while – how will people respond to the new freedoms of being able to go out and about again. We have to rediscover behaviours that we’ve essentially unlearned over the last few months.
“Unless activity returns to normal, those jobs are at risk of going, which is why we acted in the way that we did.”
The chancellor said he was “not going to write future budgets now” when pressed on how the government would pay for the record borrowing behind the measures announced on Wednesday.
Sunak said the cost of not taking this action would be far greater but that such high borrowing was not sustainable and in the medium term ministers would “return our public finances to a sustainable position”.
He said: “It’s difficult now to get exactly the right trajectory of that because we have an uncertain path ahead but as soon as we have a clearer path about that, we can look at the situation and make sure that our public finances are back on a sustainable footing over a reasonable period of time.”
Asked by LBC Radio if there could be tax rises this year, he added: “We’ll have to return our public finances to a sustainable position over a reasonable period of time – that’s the right thing to do for the economy. Not least because, as we’ve seen, things come along and we need to have the strength to respond to them.
“I will make the decisions that are required, difficult as they may be, to do that … I’m not unafraid to make whatever difficult decisions are required.”
Economic experts, trade unions and Labour have questioned whether Sunak’s “plan for jobs” had done enough to tackle the looming crisis and criticised the decision to phase out the furlough scheme in October.
Sunak acknowledged on Thursday that some firms who had no intention to let workers go could still bank the £1,000 government bonus, leading to “dead weight” – support for employers who do not need it.
He said this dead weight was necessary to act at the scale and speed required even though it presented “some degree of moral hazard … in an ideal world we wouldn’t be doing those things”.
Anneliese Dodds, the shadow chancellor, said the government was taking a “one-size fits all” approach in its incentive scheme to persuade employers to keep on furloughed staff beyond October.
She told BBC Radio 4’s Today programme: “My major concern with the way government is proceeding now is that they’re withdrawing the job retention scheme and the self-employed scheme at the same time, right across the whole economy.
“We all know that some sectors are being much more strongly impacted than others, the chancellor’s continuing with that one-sized fits all approach, we would urge him to look again at this, we have been continuously.”
Dodds said she found it “a little peculiar” that the taxpayers’ money would be going to employers “regardless of whether their business are back operating up to full capacity or not.”
She added: “We really need to have targeted support, this is a crisis like no other where the impact is very strongly sectoral. We should have had a more sectoral approach from the chancellor.”