New PM warned spending spree ‘will force tax rises’ as rate cut for pubs announced
Economists have warned Andy Burnham will be forced to raise taxes as a result of his policy offensive in his first days after entering 10th place.
The new prime minister announced a 20 per cent business rate cut for pubs, clubs and live music venues, a VAT cut on electricity bills and bus fares capped at £2 from January.
The cuts to business rates alone are expected to cost the government around £100 million a year, but it is unclear how this will be financed.
Prime Minister John Healey may have to raise taxes “significantly” to meet cost-of-living promises he has made since taking office on Monday, economists have warned.
“Depending on the price tag of all this, then it would take a significantly revenue-raising Budget to pay for some of these big items,” said James Smith, chief economist at the Resolution Foundation. Telegram.
Stephen Millard, deputy director of the National Institute for Economic and Social Research, also told the newspaper: “It’s not clear whether the money would be there if there were no tax increases. To meet these commitments, taxes will have to rise to some extent. The question, of course, is where.”
Mr Burnham insisted his policy plans were fully funded, but sacked minister Darren Jones revealed on Tuesday that the Digital ID scheme, which will be used to fund the VAT cut on the energy bill, had not been funded in the first place.
Conservative shadow chancellor Sir Mel Stride also accused the government of “not actually specifying where the money will come from”.
Asked whether Mr Burnham supports a £2 cap on single bus fares from January, Sir Mel told BBC Breakfast: “I think everything about trying to tackle cost-of-living pressures is of course very important because we have seen very high levels of inflation under this Government, among other things.
“But there’s a broader point here that’s really important, which is that under Labor we’ve faced huge debt, we’ve faced huge servicing costs on that debt, and that really means that as a government the government needs to explain exactly where all these spending commitments are going to be funded, and yesterday we saw a commitment on fuel bills, but when it came down to detail there was no money allocated for that.
“And from what I understand from this particular move on bus fares, we’re in a similar situation where they say they’re going to make some kind of savings within the energy department’s budget, but they don’t actually specify where the money is going to come from.”
On Thursday the Conservatives said Mr Burnham should explain in detail how he would pay for his policies, including cutting business rates.
Andrew Griffith, the Tory shadow business secretary, said: “While any support for Britain’s struggling businesses is welcome, once again this government has been shown to fall short on both the detail and funding of this policy.
“Burnham is days away from becoming prime minister and the government has yet to credibly explain how it will finance any of its ‘new’ policies.
“This undoubtedly means more Labor tax increases that families and businesses across the country cannot afford.”
