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The warning came from former Chancellor Ken Clarke who told ITV’s Peston in a furious outburst that sensible British people understand Rishi Sunak will be forced to raise taxes in 2021 to counteract the huge amount of public spending made in 2020. Lord Clarke urged the Government to raise fuel taxes as soon as possible, arguing the Chancellor should not wait for inflation rates to hit the country before making a decision.
He blasted: “The moment they justify borrowing a lot of money to deal with the immediate direct effects of Covid, they should be restraining other public spending more than they are.
“They’re going to have to raise taxes, and they’re going to have to cut public spending.
“Not now, but you have to prepare the public for it.
“Because sensible members of the public know that, really.
“The danger is you put it off and say let’s wait until the inflation hits us, let’s wait until we can’t get our debt away and then we’ll cross that bridge when we reach it.
“You’ve got to minimise the dangers by raising fuel taxes as soon as you possibly can.”
On Thursday, Rishi Sunak declined to comment on whether taxes would rise next year to pay for the fall out from the coronavirus crisis.
The Chancellor told BBC Breakfast: “It wouldn’t be appropriate for chancellors – any chancellor – to speculate about future tax policy because that has real-world implications.
“As you would find from any chancellor, they would talk about fiscal policy at a Budget, and obviously we will have one in the spring – we normally have them in the autumn.”
Mr Sunak said the scale of borrowing undertaken this year is “not sustainable” but that “now is not the time to address that”.
He said: “But once we get through this and we have more certainty about the economic outlook we will need to look at how we can make sure we have a strong set of public finances.”
The Chancellor also refused to comment on future tax rises on BBC Radio 4, and did not rule out breaking other manifesto commitments after he reneged on a promise to keep the overseas aid budget.
Mr Sunak told BBC Radio 4’s Today programme: “I’m not going to get drawn on future fiscal policy.”
He insisted that the Government intends to return the aid budget to 0.7 percent of gross national income when fiscal circumstances allow.
“We made a choice yesterday to prioritise people’s jobs, public services and helping this country get through coronavirus. I think it is a choice that the British people will support.”
Analysis by the Institute for Fiscal Studies (IFS) said official forecasts implied the Government will still be borrowing £100billion in 2024-25, £42 billion more than forecast in March.
That is despite the Chancellor cutting £13billion from the pencilled-in public spending plans for that year.
IFS director Paul Johnson suggested borrowing could be even higher over the coming years because Mr Sunak may be forced into extra spending commitments – including the retention of the £20-a-week increase in Universal Credit which is set to expire in April.
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“Rishi Sunak has been spending truly astonishing amounts of money this year and plans to continue to do so next year in response to Covid,” Mr Johnson said.
“Yet this was a Spending Review in which he reduced planned spending into the future, cutting more than £10billion per year from departmental spending plans next year and for subsequent years.
“He has also allocated precisely nothing for Covid-related spending after next year. And these plans assume that the temporary increase in Universal Credit will not continue beyond this year.
“Each of these assumptions is questionable.
“It seems more likely than not that spending will end up significantly higher than set out today, and so borrowing in 2024-25 will be considerably more than the £100billion forecast by the OBR (Office for Budget Responsibility).
“Either that or we are in for a pretty austere few years once again, or for some significant tax rises.”
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