Rishi Sunak should use this Budget to ditch the government’s pensions triple lock, lift taxes on older voters and should be wary of raising corporation taxes, according to former chancellor Ken Clarke.
The intervention from Lord Clarke carries some weight, since he was the chancellor who introduced tough spending limits and tax rises in the 1990s to bring the public finances back into balance following the recession earlier in the decade.
He said Mr Sunak should not feel bound by the strictures of the manifesto, including a commitment to the pensions triple lock, as well as a promise not to raise income tax, national insurance or VAT rates.
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Ken Clarke was chancellor following the recession of the early 1990s
Speaking to Sky News, he said: “I would scrap the triple lock on pensions because while there are some elderly people who have been very badly hit by the crisis… the comfortable elderly have really done rather well. They’ve saved money.
“It’s the poor, it’s the young, it’s the low-paid who’ve been hit, and so the triple lock increase in pensions, in state pension, can’t be justified.”
He urged the chancellor to impose national insurance payments on those, like him, over the age of 65.
“You could explain to people, well I’ve got to get some more revenue, I can’t just keep printing and borrowing money on this scale,” said Lord Clarke.
“And it will hit us once the crisis is over, unless we begin to tackle it now.”
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There have been multiple reports in recent weeks that the chancellor will instead take a first step to consolidate the public finances by raising corporation taxes, with small increases gradually over the coming years.
However, Lord Clarke said: “I wouldn’t put up taxes on business now. I wouldn’t announce increasing taxes and defer them.”
He added: “I took over a difficult situation where we were just coming through a recession, and one of the things I did was raise taxes. In those days, people were more inclined to accept it, they knew that sometimes, it was very unpopular when you did it, but chancellors sometimes did.
“At the moment, with today’s populist politics there’s just an assumption that you don’t do anything that’s unpopular. Well, the job of government is to take tough and difficult decisions.”
The Budget this Wednesday is expected to confirm that the UK faced its biggest economic slump since the 1920s, perhaps the 18th century, in 2020.
However, the Office for Budget Responsibility (OBR) is also expected to pencil in a strong rebound in 2021 – potentially the biggest annual growth number in half a century.
The question of whether the chancellor will use this Budget to raise taxes or defer such decisions until later this year or next year remains unanswered.
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Shadow chancellor Anneliese Dodds said Mr Sunak should be wary of raising taxes.
“What I don’t want to see is the chancellor saying that he’s imposing immediate increases in taxation right now, and that he’s doing that for the sake of the economy, when all the experts are saying that now is the time to focus on building back economic recovery,” she told Sky News.
“Our economy’s done worse than every other major economy during this crisis. We’ve had the worst reductions in GDP over time compared to other major economies.
“Really, the chancellor has got to learn from that. And he’s got to change his approach.”
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