Ex-chancellors Philip Hammond, George Osborne and Alistair Darling urge Rishi Sunak to CUT taxes over the next two years while the UK is in coronavirus ‘recovery’ – but warn of 1980s-style unemployment levels and austerity to come later
- Three former chancellors gave evidence to the Commons Treasury Committee
- Philip Hammond, George Osborne, and Alistair Darling backed tax cuts soon
- Warnings of 1980s-style unemployment levels and tough choices to come
- Here’s how to help people impacted by Covid-19
A trio of former chancellors have urged Rishi Sunak to cut taxes during the economic recovery from coronavirus – which they suggested could last for two years.
Philip Hammond, George Osborne and Alistair Darling suggested there is little economic ‘logic’ to hiking taxes at this stage despite soaring government borrowing and debt.
Instead they proposed cuts to get the economy moving, with VAT and national insurance the favoured options.
Giving evidence to the Treasury Select Committee, the ex-Cabinet ministers also warned that even if GDP bounces back fairly quickly from the crisis, unemployment is set to soar.
‘That is going to bring social challenges and economic challenges for this government,’ Mr Osborne said.
Philip Hammond (left), George Osborne (right)and Alistair Darling suggested there is little economic ‘logic’ to hiking taxes at this stage despite soaring government borrowing and debt
Apocalyptic predictions from the Bank and England and others show the UK is on track for the worst downturn since the Great Frost swept Europe in 1709
Lord Darling (pictured) insisted that the current recession was ‘very different’ to the credit crunch. ‘This one in my view is much more serious,’ he said.
He said realistically the country was going to be poorer, and in the longer term would have to choose between either more tax or lower public spending.
Mr Hammond, chancellor under Theresa May, said he would not be ‘comfortable’ with a situation where the deficit was permanently high.
But he said there would be a recovery phase over ‘the next two years where the debt as a proportion of GDP is not the primary concern’.
‘I don’t think there is any economic logic in increasing taxes in the short term,’ Mr Hammond said.
Mr Osborne said: ‘We didn’t really have to deal with mass unemployment. We never faced the structural unemployment that we saw in the 1980s.’
He added that the Government must make sure unemployed workers do not end up on long-term benefits.
The former Tory chancellor explained: ‘Governments of all colours since the Second World War have not done terribly well at getting structurally unemployed people back into work.’
Mr Hammond said: ‘A lot is going to depend whether over the next months it is clear that we are heading towards a vaccine or treatment for this disease and returning the economy to something like normal, or, by contrast, that we’re not heading towards an early vaccine or a treatment and we have to plan, in terms of restarting the economy living with Covid – restructuring our businesses so they can operate in a sub-optimal way so they can operate with the disease.’
The trio also discussed interventions, welcoming the furlough scheme but warning it would need to be extended in some form
The trio also discussed interventions, welcoming the furlough scheme but warning it would need to be extended in some form.
Lord Darling and Mr Osborne disagreed over how serious the current situation is.
Lord Darling insisted that the current recession was ‘very different’ to the credit crunch. ‘This one in my view is much more serious,’ he said.
But Mr Osborne said the history of pandemics was that the bounceback ‘tended to be fairly rapid’, as opposed to the ‘very slow and protracted and painful’ recovery from financial crises.
Mr Osborne said the scale of interventions by governments and central banks was such that ‘the laws of maths say that GDP has got to come back’.
‘But there will be lot of people in businesses that have gone bust that are not going to return.’