Chancellor Rishi Sunak has told Conservative MPs to expect tax rises in the next Budget, but reassured that will not constitute “a horror show of tax” with “no end in sight” as the government deals with the impact of the Covid-19 pandemic on public finances.
It is the first time that Sunak has acknowledged that tax rises will be needed to repair the economic damage caused by the outbreak, which has delivered a significant blow of roughly £300 billion to the public purse.
Sunak called on recently elected Tory MPs to trust the government to overcome the “short-term challenges”, warning that it would not be possible to “simply borrow our way out of any hole”.
Reports over the weekend suggested that the Treasury was weighing up large rises in corporation tax and adjustments to capital gains tax to ease economic woes, but this has now been dismissed by the government as mere “speculation”.
Sunak’s statement to the MPs, which was accidentally revealed ahead of time when he was pictured on Downing Street holding his notes, read: "We will need to do some difficult things, but I promise you, if we trust one another we will be able to overcome the short-term challenges.
“Now this doesn't mean a horror show of tax rises with no end in sight. But it does mean treating the British people with respect, being honest with them about the challenges we face and showing them how we plan to correct our public finances and give our country the dynamic, low-tax economy we all want to see."
Prime minister Boris Johnson warned the MPs of tough times ahead.
He said: "I know it's been tough. I've got to warn you, it's about to get tougher. The waters are about to get choppier. But we are going to deal with it."
Johnson later met with the 1922 Committee of backbench Conservative MPs, who convened for the first time since Parliament’s summer recess.
The committee’s chair, Sir Graham Brady, has warned that the government must be “very, very cautious” about implementing tax rises in the upcoming Budget.
Speaking on BBC Radio Four, Sir Graham warned that the government must not “make this crisis worse than it has to be”.
He said: "Fundamental to that is making sure the country gets back to work and people resume as far as possible normal life.
"Raising taxes, and the wrong types of taxes especially, can be a way in which you stifle growth rather than guaranteeing it."
In other news, health secretary Matt Hancock has defended the government’s government decision to consider former Australian prime minister Tony Abbott as the joint president of the UK’s Board of Trade.
On Thursday morning, Hancock appeared to acknowledge comments that Abbott was a “homophobic misogynist” during an interview with Sky News, but defended the former Australian premier by calling him "a trade expert".
Responding to a question in the House of Commons on Thursday about the possibility of Abbott being handed a post-Brexit trade role, trade minister Greg Hands also spoke in defence of the former Australian leader, saying: "No appointments have been confirmed, but personally I welcome the fact that a former prime minister of Australia is willing to help this country out."
Labour leader Sir Keir Starmer said: "I have real concerns about Tony Abbott and I don't think he's the right person for the job. If I was prime minister, I wouldn't appoint him."
Meanwhile, Scottish Labour leader Richard Leonard has continued to resist calls to resign, insisting that he has the backing of the party.
Four Scottish Labour MSPs have been vocal in calls for Leonard to stand down, with two of them, James Kelly and Mark Griffin, resigning from their roles as party justice spokesman and social security spokesman, respectively.
Shadow cabinet minister in the UK Labour party, Rachel Reeves, has also called on Leonard to “consider his position”.
Leonard has hit out at critics from within the party for waging “an internal war” against him, and insisting that he will go into next year’s Scottish Parliament elections championing his party’s ambitions of "building a National Care Service, establishing a quality Jobs Guarantee scheme and reviving Scotland's economy with a Green New Deal".
Leonard told BBC Radio’s Good Morning Scotland programme: "I am elected by members of the Scottish Labour Party. That is who I'm accountable to.
"They elected me back in 2017 to lead the Scottish Labour Party into the May 2021 Scottish Parliament elections. That is what I am on course to do.
"I am confident that I've got the backing of the members of the Scottish Labour Party who elected me just under three years ago to lead this party."
Leonard has served as leader of Scottish Labour since 2017, but there have been concerns over his and the party’s performance since, with opinion polls suggesting that Scottish Labour is trailing well behind the SNP and the Scottish Conservatives ahead of next May’s elections.
Pro-UK campaigners have raised concerns that a poor performance from Scottish Labour could lend a hand to the SNP in winning a pro-independence majority in Holyrood.
A defiant Leonard said that he had inherited a party that was already third in the polls, adding that he had “faith in the values that we stand for” and “in the policy ideas that we will offer the people".
He said: "I think the political environment is changing because of the pandemic, I think people are re-evaluating their priorities.
"I am sure as people get nearer to the election next year they will understand that the next five years, the next Scottish government and the next Scottish Parliament's priorities will need to be on recovering the economy, tackling the jobs crisis and investing in public services like our National Health Service.
"I am convinced that when we get closer to the election and the policy agenda is defined, more and more [people] will turn to the Scottish Labour Party."
SNP leader and Scottish first minister Nicola Sturgeon told Sky News amid the furore that the Scottish Labour party was “at sea” over the issue of Scottish independence, warning that it must determine “what exactly is Scottish Labour for” having “lost count” of how many leaders the party has had.
Explaining that she had no view on whether Leonard should stand down, Sturgeon said: “Until they [Scottish Labour] get a position that distinguishes them from Conservatives on the matter of Scotland’s future, they can have as many leaders as they like.”
Ahead of the eight round of post-Brexit trade talks between the UK and EU next week, Downing Street has said that an agreement “is still possible” but “will not be easy to achieve”.
EU chief negotiator Michel Barnier has warned that October is the strict deadline for a deal to be finalised so that it can be given formal ratification before the end of the year, when the post-Brexit transition period is due to lapse and UK-EU trade will default to World Trade Organization terms if no deal is in place.
The prime minister’s official spokesman said this week: "Major difficulties remain. The EU's insistence on progress on state aid and fisheries is an obstacle to making progress overall."
Barnier has said this week that the EU has “moved” on some of its objectives, and that the onus is now on the UK to make similar concessions in key areas such as fisheries and the so-called level-playing field to hasten progress towards a deal.
He said that those concessions must include “credible guarantees” from the UK on issues around state aid, alongside level-playing field guarantees in tax, labour rights and the environment, before hitting out at the UK for a lack of compromise on fisheries.
Barnier said: “Obviously the UK will recover the full sovereignty of their waters. No doubt. No question. But it is another thing, another story, speaking about the fish which are inside those waters.
“Where the EU has shown openness to possible solutions, the UK has shunned our offers.”
He added: “Since the start of these negotiations, the UK has not shown any willingness to seek compromises on fisheries. The UK government's position has not evolved in the past months.
"The EU has repeatedly shown flexibility and creativity to work with the UK's red lines - on the role of the European Court of Justice, on preserving the UK's legislative autonomy and on fisheries. It is time for the UK to reciprocate on those issues that are fundamental for the EU.
"I continue to think that prime minister Boris Johnson wants an agreement with the EU."
