LONDON- Finance minister Rishi Sunak delivered what he hopes will be a last big spending splurge to get Britain’s economy through the COVID-19 crisis, and announced a corporate tax hike from 2023 as he began to focus on the huge hit to the public finances.
Sunak said in an annual budget speech on Wednesday that the economy would return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, helped by Europe’s fastest coronavirus vaccination program.
But lasting economic damage equivalent to 3 percent of annual output would persist, and 65 billion pounds ($91 billion) of extra support was needed in the short term as restrictions were lifted over the next few months, he said.
Sunak’s early warning that he will demand more money from companies – and most individual taxpayers too – makes him one of the first policymakers from rich countries to set out a plan to tighten budget policy after the pandemic.
Britain’s first rise in corporation tax since 1974 will see big, profitable companies pay 25 percent from 2023 compared to 19 percent now and the overall rate of taxation in the economy increase to its highest since 1969.
But before then firms can use a two-year “super-deduction” tax break that Sunak hopes will snap them out of their pandemic deep-freeze and invest to boost short-term growth.
The government’s budget watchdog said the move was likely to bring forward investment that would have taken place later. – Reuters