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Coronavirus: Chancellor Rishi Sunak warns of 'tough choices ahead' after recession

The chancellor dismissed speculation about capital gains tax but acknowledged public finances are on an unsustainable path.

Ed Conway

Economics and data editor

Wednesday 15 July 2020 22:31, UK

BARRY, UNITED KINGDOM - JUNE 12: A man and woman look at closed shops on during the coronavirus lockdown period on June 12, 2020 in Barry, United Kingdom. GDP fell by 20.4% in April, compared with the previous month, according to data from the Office for National Statistics. At the end of April the economy was about 25 per cent smaller than in February. The Welsh government has further relaxed COVID-19 lockdown measures this week, allowing people from different households to meet up outside while maintaining social distancing. Schools have remained closed and those who have been advised to shield at home can go outside again but have been told to avoid shopping. (Photo by Matthew Horwood/Getty Images)
Image: The chancellor said the pandemic has had an enormous impact on the economy
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Britain faces some "tough choices ahead" on repairing the public finances after the current recession has passed, the chancellor has warned.

In a hearing of the Treasury select committee, Rishi Sunak declined to comment on whether he is planning to raise taxes or cut spending to finance the hundreds of billions of pounds of borrowing the UK is currently doing.

But he acknowledged he would confront the question in his budget later this autumn.

The comments come amid growing speculation the chancellor will have to find new sources of revenues in the coming years, speculation exacerbated by a new review commissioned by the Office of Tax Simplification into capital gains tax (CGT).

Chancellor of the Exchequer Rishi Sunak greets an employee during his visit to Worcester Bosch factory to promote the initiative, Plan for Jobs.
Image: Rishi Sunak was pictured visiting a factory last week

The chancellor dismissed that review as a sign of forthcoming rises in CGT but admitted the public finances were on an unsustainable path as the COVID-19 pandemic takes its toll.

He said: "There are tough choices ahead. That is clear.

"We've been through this once in a lifetime episode and it's had an enormous impact on the economy and public finances.

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"That means there are some tough choices to come."

Asked whether he could keep the Conservative manifesto pledge not to raise any of the major tax rates on income tax, national insurance or VAT, Mr Sunak said: "Our ambition is to deliver on all priorities we set out, but I can't comment one way or the other on tax policy."

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In a wide-ranging but largely technical hearing, the chancellor also effectively ruled out any late changes to the furlough scheme to extend it to those who are currently excluded, including some small business owners.

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He also dismissed calls from Labour MPs to introduce new furlough support for certain sectors of the economy.

The hearing followed last week's summer economic statement, in which the chancellor temporarily cut VAT for the hospitality sector and introduced a stamp duty holiday for most homebuyers.

The VAT cut came into effect on Wednesday.

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