‘More spending must require more tax’

New Chancellor Rishi Sunak must raise taxes in his first Budget if the Government is to stick to its own borrowing rules.

The Institute for Fiscal Studies (IFS) warned that "radical changes to taxes" are needed to increase funding for the NHS and social care.

However, the Conservative election manifesto vowed to freeze the rates and thresholds for income tax, VAT and corporation tax for 2020/21.

Sunak, who was appointed chancellor after Sajid Javid's shock resignation, will deliver his Spring Budget on 11 March 2020.

The IFS said Sunak is "hemmed in by a rising deficit and fiscal targets set out in the Conservative manifesto".

Paul Johnson, director at the IFS, said:

"Rishi Sunak's first Budget could be the most important fiscal event in years. If this new government is going to make radical changes to taxes and spending this surely is the time to do it.

"They will allow him to increase investment spending, which will be welcome if well targeted, but they will not allow substantial increases in current spending, or tax cuts, to be funded by more borrowing.

"We have already had 16 fiscal targets in a decade, and fiscal targets should not just be for Christmas.

"Mr Sunak should resist the temptation to announce another and instead recognise that more spending must require more tax."

We will provide coverage of Spring Budget 2020.