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Tax rises are likely to be ordered by Chancellor Rishi Sunak when the economy gets back to “near normal”, an economic watchdog predicted today.
Carl Emmerson, deputy director of the respected Institute for Fiscal Studies, spoke out in the wake of Boris Johnson’s speech which pledged to fast-track construction schemes to boost recovery from coronavirus funded by unparalleled borrowing in peacetime.
Thousands more potential job losses were revealed this week as firms warned they were going to have to lay off staff. Up to about 5,000 jobs are under threat at Upper Crust and Caffe Ritazza owner SSP after a fall in passengers numbers at rail stations and airports.
Aerospace giant Airbus announced it was cutting 1,700 jobs in the UK due to the pandemic while the union Balpa said that easyJet was considering axing more than 700 pilot jobs.
Meanwhile shirtmaker TM Lewin said about 600 people would lose their jobs as all 66 high street shops will close. The Royal Mail is set to cut 2,000 management jobs. Another 1,000 jobs are under threat after Harveys furniture chain went into administration.
Mr Emmerson said: “For now the focus needs to remain on measures that will help secure the recovery, even if that comes at the cost of yet more borrowing in the current financial year. Once we are through the crisis— and the economy has recovered to near its new normal — we will have much higher debt, alongside, most likely, a still elevated deficit and increased demands for additional spending in areas such as social care. At that point it would not be surprising to see a package of tax-raising measures.”
Hopes that Britain will recover quickly were boosted last night when Bank of England chief economist Andy Haldane said: “It is early days, but my reading of the evidence is so far, so V.” A V-shaped recovery suggests a rapid rebound.
However, Garry Young, deputy director at think tank NIESR, warned: “The economic outlook is extremely uncertain and depends critically on whether Covid-19 is kept under control. Even without recurrence, the economic recovery could be slow.”
Business Secretary Alok Sharma told BBC Breakfast: “I’m very sorry to hear about the job losses … We will make sure that we provide support to people.”
He was forced to defend Mr Johnson’s big planning speech when interviewers pointed out the £5 billion investment was a fraction of the New Deal policies of depression-era US president Franklin D Roosevelt.
Mr Sharma told BBC Radio 4’s Today it was about getting “shovel-ready projects up and running” and extra billion pounds in terms of the school rebuilding programme.
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