Rishi Sunak warned of 'bleak autumn' as coronavirus recession bites
RISHI SUNAK has been warned by an economist who told Express.co.uk the UK is in for an economically "bleak autumn" as the recession, triggered by the pandemic, enters a new stage.
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The UK is currently grappling with its first recession in 11 years as a result of the coronavirus pandemic and subsequent lockdown. Chancellor Rishi Sunak has since embarked on several economic policies to soften the blow of the economic fallout. Some include the Eat Out to Help Out scheme which was rolled out throughout August, while the main project saw millions of workers across the country furloughed while unable to work.
As autumn approaches, many experts and economic forecasters have warned the Chancellor and government that drastic action needs to be taken in order to curb autumn and winter fallout.
Mr Sunak is widely believed to be preparing to announce a range of measures to carry the cost of the pandemic thought to total to around £300billion.
Last week, he urged swathes of the new 2019 Tory intake – which included MPs from previously "Red Wall" seats – to put their trust in him over the "short-term challenges" the party and country faces.
Mr Sunak is understood to be looking at hiking corporation tax from 19 percent to 24 percent to raise £12billion next year and £17billion in 2023/24.
Second-home owners would also be hit under proposals to require people to pay capital gains tax at the same rate as they pay income tax.
Potential tax hikes have been criticised by many, including Mark Littlewood, director general of the Institute of Economic Affairs (IEA), who told Express.co.uk this autumn could see substantial job losses and vast business closures.
He said: "In the short term, inevitably, the impact of lockdown is going to have and has had very drastic effects.
"I think we are yet to really feel them all because a lot of the government's and Chancellor's strategy has been not just to flatten the curve of COVID-19 but to flatten the curve of the recession.
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"I think as we emerge from lockdown it's then that we're going to see the spring of impact because furlough will end and a lot of companies will turn out not to be viable.
"I think this coming autumn is going to be very bleak indeed for the economy.
"We could see very substantial job losses and increased business closures.
"I'm not expecting an immediate bounce back as this looks like a much worse hit than the banking crisis of 2008 in terms of national income going down.
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"It could be as much as three times as bad as that in terms of damage done to British GDP - and that took years to recover from."
Many UK businesses have voiced their concerns over the coming autumn and winter period and potential financial losses.
The hospitality sector, for example, has taken in less money compared to the summer months year on year even pre-COVID.
Potential tax hikes are thought to be intended to stimulate VAT prices and balance the dire economic fallout from the months passed.
However, many disagree that tax hikes are the correct way to go about regaining lost financial ground, arguing that tax cuts and reduction on VAT prices are in fact a better way to approach the issue.
This, they say, would encourage consumer spending and allow for more economic output.
Equally as many forecasters claim that momentary tax hikes are wholly necessary.
Paul Johnson, the director of the Institute for Fiscal Studies, said income tax, national insurance or VAT would need to rise to have any real impact on public finances.
He has remarked: “If you are looking to raise taxes, the likelihood is it’s going to have to be a fairly substantial increase."
Prime Minister Boris Johnson appears to have signalled his support for Mr Sunak's plans, and has said that the 20 percent basic rate of income tax could be increased by two or three percentage points and that the 40 percent higher rate could also go up.
Any such change would break the Conservatives’ “triple tax lock” promise not to increase income tax, national insurance or VAT for five years.